OVERVIEW BUSINESS REVIEW ANNUAL REPORT & FINANCIAL STATEMENTS OTHER INFORMATION 151
Available Fair value Share-based AGSMEIS Other Retained Ordinary Non- Total equity
for sale through OCI payment reserve regulatory earnings shareholders' controlling Nmillion
reserve reserve Nmillion Nmillion 185,218
Nmillion reserve Nmillion 749 reserves 83,081 equity interest (10,224)
- Nmillion 29 - Nmillion (10,173) Nmillion Nmillion 174,994
- 749 72,908 182,060 71,760
- 5,192 29 40,162 72,087 (10,228) 3,158 74,440
(51) - - 72,087 171,836 4 (2,680)
- - - 69,481 (2,203)
5,141 - - 72,087 3,158 356
- (2,606) - 40,162 - (2,606) 2,279 (783)
(2,129) 2,353 (77)
- - - - - 27
- (2,606) - - 356 (74) -
- (2,129) - - - (783) (74) -
- (7,487) (77)
- 356 - - (1,407) -
(783) 27 -
(77) - - -
- -
27 - - -
-
- - -
1,407 7,487
-
- - 47 -- (15,138) (5,911) (1,176) (7,087)
- - 47 -- - 47 47
-
-- - - - (15,138) 9,180 (1,176) 9,180
- 2,535 76 2,156 47,649 120,963 (15,138) 4,261 (16,314)
235,406 239,667
942 36 - 33,615 50,157 137,102 3,696 140,798
- -- 46,195 50,445 2,250 52,695
4,250 -- -- 46,195 46,195 2,186 48,381
4,230 - -- 4,314
-- -- - 4,250 64 4,294
(63) -- -- - 4,230 64 (63)
83 -- - 83
- -- - 1,025 (63) - -
- (749) 83 -
749 - (6,547) - - -
- 6,547
- -
- - (7) -- (7,000) (5,487) (2,788) (8,275)
- - (7) -- - ( 7) - (7)
- -- -- - -
- -- -- 1,520 1,520
5,192 - 29 749 40,162 (7,000) (7,000) (2,788) (9,788)
83,081 182,060 3,158 185,218
152 Stanbic IBTC Annual report for the year ended 31 December 2018
SEPARATE STATEMENT OF
CHANGES IN EQUITY
For the year ended 31 December 2018
Company Ordinary share capital Share premium
Nmillion Nmillion
Balance at 1 January 2018 5,025 66,945
Total comprehensive income for the period
Profit for the period - -
Transactions with shareholders, recorded directly in equity 95 9,085
Equity-settled share-based payment transactions
Transfer of vested portion of equity settled share based payment to retained earnings 95 9,085
Increase in paid-up capital (scrip issue) - -
Dividends paid to equity holders
Balance at 31 December 2018 5,120 76,030
Balance at 1 January 2017 5,000 65,450
Total comprehensive income for the period
Profit for the period - -
Transactions with shareholders, recorded directly in equity 25 1,495
Equity-settled share-based payment transactions
Increase in paid-up capital (scrip issue) 25 1,495
Dividends paid to equity holders -
Balance at 31 December 2017 66,945
5,025
The accompanying notes from page 155 to 286 form an integral part of these financial statements
OVERVIEW BUSINESS REVIEW ANNUAL REPORT & FINANCIAL STATEMENTS OTHER INFORMATION 153
Fair value Share-based Other Retained Ordinary
through OCI payment reserve regulatory earning shareholders’ equity
Nmillion
reserve Nmillion reserves 20,680 Nmillion
Nmillion 4 Nmillion 15,499 92,654
15,499 15,499
- - - 15,499
- (15,138)
- 15 - - (5,943)
15 15
- - -
- - (15,138) 9,180
- - (15,138)
- 19 - 21,041 102,210
- -
- 5 2,515 72,970
- 25,165 25,165
- - 25,165 25,165
- -
- (1) (7,000) (5 481)
(1) - - (1)
- - -
- - - 1,520
- - - (7,000) (7,000)
- 4 - 20,680 92,654
-
154 Stanbic IBTC Annual report for the year ended 31 December 2018
CONSOLIDATED AND SEPARATE
STATEMENT OF CASH FLOWS
For the year ended 31 December 2018
Group Company
Note 31 Dec. 2018 31 Dec. 2017 31 Dec. 2018 31 Dec. 2017
Nmillion Nmillion Nmillion Nmillion
31.6
Net cash flows from operating activities 31.8 112,830 131,786 14,939 26,668
Cash flows used in operations 31.8
Profit before tax 31.5 36,089 57,651 (2,078) 1,926
Adjusted for:
Credit impairment charges on loans and advances 22 88,152 61,166 16,000 27,545
Depreciation of property and equipment 23
Amortisation of intangible asset 18 (57,014) (57,915) (16,851) (26,854)
Dividend income 31.2
Equity-settled share-based payments 31.1 (2,940) 25,577 --
Unobservable Valuation difference in derivatives 31.5
Fair value adjustment for derivatives 35.1 4,432 4,129 346 308
Non-cash flow movements in other borrowings 35.2
Non-cash flow movements in debt issued 45 46 --
Impairment of intangible asset 24.1
Interest expense (261) (112) (16,941) (28,092)
Interest income
Loss/(gain) on sale of property and equipment 47 (7) 15 (1)
(Increase)/decrease in income-earning assets
Increase/(decrease) in deposits and other liabilities (8,827) (9,598) --
Dividends received
Interest paid (8,847) 3,667 --
Interest received
Direct taxation paid 6,068 1,035 --
31,549 1,082 --
- 62 --
40,173 39,324 - 1,095
(118,382) (122,911) (271) (45)
(71) (209) - (119)
(184,997) (258,873) (1,943) 78
189,948 313,273 716 1,157
235 101 16,941 28,092
(41,169) (36,855) - (1,095)
129,016 121,193 271 45
(11,341) (10,304) (195) (2,300)
Net cash flows from/ (used in) investing activities (100,660) (62,345) (993) 993
Capital expenditure on
- property 17 (1,228) (1,820) - -
- equipment, furniture and vehicles 17 (3,210) (3,318) (829) (110)
- intangible assets
Proceeds from sale of property, equipment, furniture (267) - - -
and vehicles
(Purchase)/sale of financial investments 308 2,297 7 1,808
(96,263) (59,504) (171) (705)
Net cash flows (used in)/from financing activities (18,176) (30,448) (5,958) (21,884)
Proceeds from addition to other borrowings 22 13,158 25,278 - -
Repayment of other borrowings 22 (24,200) -
Proceed from scrip issue (47,458) (16,404)
Cash dividends paid 19.3 (7,134) 1,520 (5,958) 1,520
Net increase/(decrease) in cash and cash equivalents (6,006) 7,988
Effect of exchange rate changes on cash and cash (9,788) (7,000)
equivalents 35.4 3,198 38,993 - 5,777
Cash and cash equivalents at beginning of the period 230,009 7,545
Cash and cash equivalents at end of the period (745) 15,533 -
35.3 227,201 191,761 1,768
230,009 7,545
The accompanying notes from page 155 to 286 form an integral part of these financial statements
OVERVIEW BUSINESS REVIEW ANNUAL REPORT & FINANCIAL STATEMENTS OTHER INFORMATION 155
NOTES TO THE CONSOLIDATED AND
SEPARATE FINANCIAL STATEMENTS
For the year ended 31 December 2018
1 Reporting entity • financial assets are measured at fair Applicable before 1 January 2018
value through other comprehensive and after 1 January 2018
Stanbic IBTC Holdings PLC (the income (applicable from 1 January
“company”) is a company domiciled in 2018) • Note 6.8 Depreciation and useful life of
Nigeria. The company’s registered office property and equipment
is at I.B.T.C. Place Walter Carrington • liabilities for cash-settled share-based
Crescent Victoria Island, Lagos, Nigeria. payment arrangements are measured at Applicable after 1 January 2018
These consolidated financial statements fair value
comprise the company and its subsidiaries • Classification of financial assets:
(together referred to as the ”group”). The • trading assets and liabilities are assessment of the business model
group is primarily involved in the provision measured at fair value within which the assets are held and
of banking and other financial services to assessment of whether the contractual
corporate and individual customers. The group applies accrual accounting for terms of the financial asset are solely
recognition of its income and expenses. payments of principal and interest on
2 Basis of preparation the principal amount outstanding.
(a) Statement of compliance (c) Going concern assumption
Assumptions and estimation
The consolidated financial statements for These consolidated and separate financial uncertainties
the year ended 31 December 2018 have statements have been prepared on the
been prepared in accordance with IFRS. basis that the group and company will • Information about assumptions and
Selected explanatory notes are included continue to operate as a going concern. estimation uncertainties that have a
to explain events and transactions that significant risk of resulting in a material
are significant to an understanding of (d) Functional and presentation adjustment in the year 31 December
the changes in financial position and currency 2018 is included in the following notes.
performance of the group since the
last annual consolidated financial These consolidated and separate financial Applicable after 1 January 2018
statements as at and for the year ended statements are presented in Nigerian
31 December 2017. Naira, which is the company’s functional • I mpairment of financial instruments:
and presentation currency. All financial assessment of whether credit risk
This is the first set of the group’s annual information presented in Naira has been on the financial asset has increased
financial statements where IFRS 15 rounded to the nearest million, except significantly since initial recognition
Revenue from Contracts with Customers when otherwise stated. and incorporation of forward-looking
and IFRS 9 Financial Instruments have information in the measurement of ECL.
been applied. Changes to significant (e) Use of estimates and judgement
accounting policies are described in Applicable before 1 January 2018
note 3. The preparation of the consolidated and after 1 January 2018
and separate financial statements in
The consolidated financial statements for conformity with IFRS requires management • Determination of the fair value of
the period ended 31 December 2018 was to make judgements, estimates and financial instruments with significant
approved by the Board of Directors on 31 assumptions that affect the application unobservable inputs (see note 6.2).
January 2019. of accounting policies and the reported
amount of assets, liabilities, income and • Recognition of deferred tax assets:
(b) Basis of measurement expenses. Actual results may differ from availability of future taxable profit
these estimates. against which carry-forward tax losses
These consolidated and separate annual can be used.
financial statements have been prepared In preparing these consolidated financial
on the historical cost basis except for the statements, management has made • Recognition and measurement of
following material items in the statement judgements, estimates and assumptions provisions and contingencies: key
of financial position: that affect the application of the Group’s assumptions about the likelihood and
accounting policies and the reported magnitude of an outflow of resources.
• derivative financial instruments are amounts of assets, liabilities, income and
measured at fair value expenses. Actual results may differ from 3 Changes in accounting policies
these estimates.
• financial instruments at fair value Except as decribed below, the group
through profit or loss are measured at Judgements has consistently applied the accounting
fair value policies as set out in Note 4 to all
Information about judgements made periods presented in these annual
• available-for-sale financial assets are in applying accounting policies that financial statements.
measured at fair value (applicable have the most significant effects on the
before 1 January 2018) amounts recognised in the consolidated The group has adopted IFRS 15 Revenue
financial statements is included in the from Contracts with Customers (see 3.1)
following notes.
156 Stanbic IBTC Annual report for the year ended 31 December 2018
NOTES TO THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS
For the year ended 31 December 2018
and IFRS 9 Financial Instruments (see ii) Asset management fee : Fee is Under IFRS 9, on initial recognition, a
3.2) from 01 January 2018. A number of based on daily net asset of the fund financial asset is classified as measured at:
other new standards are effective from or performance of the fund at the end amortised cost, fair value through other
01 January 2018 such as IFRS 4 Insurance of the quarter. The impact of IFRS 15 comprehensive income (“FVOCI”), or fair
Contracts and IFRIC 22 Foreign Currency on accounting treatment has been value through profit or loss (“FVTPL”).
Transactions and Advance Consideration, assessed to be immaterial. The classification of debt financial assets
but they do not have a material effect under IFRS 9 is generally based on the
on the group’s financial statements. iii) I nsurance fees and commission: business model in which the financial
The effect of initially applying these These include administrative and assets is managed and its contractual cash
standards is mainly attributed to an brokerage fee charges on insurance flow characteristics.
increase in impairment loss recognised related products. The impact of IFRS
on financial assets. 15 on accounting treatment has been The adoption of IFRS 9 has not had
assessed to be immaterial. a significant effect on the group’s
3.1 IFRS 15 Revenue from Contracts accounting policies related to
with Customers 3.2 IFRS 9 Financial Instruments financial liabilities.
This standard replaces IAS 11 Construction IFRS 9 Financial Instruments (“IFRS 9”) The impact of IFRS 9 on the classification
Contracts, IAS 18 Revenue, IFRIC 13 replaces the existing standard dealing with and measurement of financial assets is set
Customer Loyalty Programmes, IFRIC 15 the accounting treatment for financial out below.
Agreements for the Construction of Real instruments IAS 39 Financial Instruments:
Estate, IFRIC 18 Transfer of Assets from Recognition and Measurement (“IAS 39”) The effect of adopting IFRS 9 on the
Customers and SIC-31 Revenue from 1 January 2018. carrying amounts of financial assets as
– Barter of Transactions Involving at 01 January 2018 relates to the new
Advertising Services. IFRS 9 consists of the following key impairment requirements, as described
areas which represent changes from further below.
The standard contains a single model that that of IAS 39:
applies to contracts with customers and Changes in accounting policies resulting
two approaches to recognising revenue: • Revised requirements for the from the adoption of IFRS 9 have
at a point in time or over time. The model classification and measurement of been applied retrospectively, except as
features a contract-based five-step financial assets and consequential described below.
analysis of transactions to determine changes in the classification and
whether, how much and when revenue is measurement of financial liabilities, Comparative periods generally have not
recognised. mainly relating to the recognition of been restated. Differences in the carrying
changes in fair value due to changes in amounts of financial assets and financial
The core principle of IFRS 15 is that an own credit risk on fair value designated liabilities resulting from the adoption of
entity recognises revenue to depict the financial liabilities in OCI as opposed to IFRS 9 are recognised in retained earnings
transfer of promised goods or services to the income statement. and reserves as at 1 January 2018.
customers at an amount that reflects the
consideration which the entity expects to • An expected credit loss (“ECL”) Accordingly, the information presented for
be entitled to in exchange for those goods impairment model as against the 2017 does not reflect the requirements of
and services. incurred loss impairment model in IFRS 9 and therefore is not comparable to
IAS 39. the information presented for 2018 under
Given the nature of fees earned by the IFRS 9.
group and based on management’s • Revised requirements and
assessment, IFRS 15 did not have material simplifications for hedge accounting. The Group used the exemption not
impact on the group’s financial statements to restate comparative periods but
on transition date of 01 January 2018. The The details of new significant accounting considering that the amendments made by
group has analysed the nature of its fees policies and the nature and effect of the IFRS 9 to IAS 1 intoduced the requirement
as follows: changes to previous accounting policies to present ‘interest income calculated
are set out below. using the effective interest rate’ as a
i) Bank transaction fees: These separate line item in the statement of
include electronic banking charges, Classification and measurement of profit or loss and OCI, the Group has
account transaction fee, custody fees financial assets and financial liabilities reclassified comparative interest income
among others. The impact of IFRS 15 on finance lease to ‘other interest income’
on accounting treatment has been IFRS 9 largely retains the existing and changed the description of the line
assessed to be immaterial. requirements in IAS 39 for the item from ‘interest income’ reported in
classification and measurement of financial 2017 to ‘interest income calculated using
liabilities. However, it eliminates the the effective interest method’.
previous IAS 39 categories for financial
assets of held to maturity, loans and
receivables and available for sale.
OVERVIEW BUSINESS REVIEW ANNUAL REPORT & FINANCIAL STATEMENTS OTHER INFORMATION 157
The following assessments have been • The designation of certain investments If a debt security had low credit risk at the
made on the basis of the facts and in equity instruments not held for date of initial application of IFRS 9, then
circumstances that existed at the date of trading as at FVOCI. the Group has assumed that credit risk on
initial application. the asset had not increased significantly
• For financial liabilities designated as at since its initial recognition.
• The determination of the business FVTPL, the determination of whether
model within which a financial asset is presenting the effects of changes in The following tables and the
held. the financial liability’s credit risk in OCI accompanying notes below explain the
would create or enlarge an accounting original measurement categories under IAS
• The designation and revocation of mismatch in profit or loss. 39 and the new measurement categories
previous designations of certain under IFRS 9 for each class of the group’s
financial assets and financial liabilities financial assets as at 01 January 2018.
as measured at FVTPL.
Effect of IFRS 9 transition on the consolidated statement of financial position
Statement of financial position line IFRS 9 restated Previously reported under IAS 39 Transitional Note
items affected N’million 31 December 2017 adjustment
N’million
Assets N’million
Cash and cash equivalents
Pledged assets 401,346 401,348 (2) (a)
Trading assets 43,240 43,240 - (b)
Derivative assets 151,479 151,479 - (c)
Financial investments 11,052 11,052 - (d)
Asset held for sale 316,641 316,641 -
Loans and advances to banks 114 114 -
Loans and advances to customers 9,623 9,623 -
Other assets
Property and equipment 362,527 372,088 (9,561)
Intangible assets 49,442 49,442 -
Deferred tax assets 21,883 21,883 -
Total assets 605 605 -
Liabilities 8,916 8,901
Trading liabilities 15
Derivative liabilities 1,376,868 1,386,416 (9,548)
Current tax liabilities
Deposits from banks 62,449 62,449 -
Deposits from customers 2,592 2,592 -
Other borrowings -
Subordinated debt 12,240 12,240 -
Provisions 61,721 61,721 -
Other liabilities 753,642 753,642 -
Deferred tax liabilities 74,892 74,892 -
Total liabilities 29,046 29,046 -
Equity 12,979 12,979 676 (e)
Share capital 192,193 191,517 -
Share premium 676
Reserves 120 120
Non-controlling interest 1,201,874 1,201,198
Total equity
Total equity and liabilities 5,025 5,025 -
66,945 66,945 -
99,866 110,090 (10,224)
-
3,158 3,158 (10,224)
174,994 185,218 (9,548)
1,376,868 1,386,416
158 Stanbic IBTC Annual report for the year ended 31 December 2018
NOTES TO THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS
For the year ended 31 December 2018
3.2 IFRS 9 Financial Instruments (continued)
Classification and measurement of financial assets and financial liabilities as at 1 January 2018
In Nmillion Note Original classification New Classification Original carrying Value New carrying Value Transitional
under IAS 39 under IFRS 9 under IAS 39 at inital under IFRS 9 at inital adjustment
application date
application date 2
-
Financial assets -
-
Cash and cash equivalents (a) Loans and Amortised cost 401,348 401,346 -
Derivative assets receivables FVTPL 11,052 11,052 -
Trading assets Held-for-trading FVTPL -
Pledged assets Held-for-trading FVTPL 151,479 151,479
Held-for-trading FVOCI 10,769 10,769 -
Financial investments (b) Available-for-sale FVOCI 32,471 32,471
(c) Available-for-sale FVTPL 316,641 315,047 9,561
Loans and advances to
banks Loans and Amortised cost - 1,594 -
Loans and advances to receivables 9,563
customers Loans and Amortised cost 9,623 9,623
receivables
Other assets Loans and Amortised cost 372,088 362,527
Total financial assets receivables
41,427 41,427
1,346,898 1,337,335
Financial liabilities
Derivative liabilities Held-for-trading FVTPL 2,592 2,592 -
Trading liabilities Held-for-trading FVTPL 62,449 62,449 -
Deposits from banks Other amortised cost Amortised cost 61,721 61,721 -
Deposits from customers Other amortised cost Amortised cost 753,642 753,642 -
Other borrowings Other amortised cost Amortised cost 74,892 74,892 -
Subordinated debt Other amortised cost Amortised cost 29,046 29,046 -
Other liabilities (e) Other amortised cost Amortised cost 186,827 187,503 (676)
Total financial liabilities 1,171,169 1,171,845 (676)
FVOCI - Fair value through other comprehensive income
FVTPL - Fair value through profit or loss
Note
(a) The transition adjustment relating to cash and cash equivalents represents expected credit loss requirement per IFRS 9
for loans and advances to bank.
(b) Financial investments include mutual funds and unit linked investments, which are interests in investment vehicles holding
mix of debt instruments, equity, and cash. Given the nature, the investment did not meet the IFRS 9 criteria for classification as
FVOCI or amortised cost. As such, they have been classified under IFRS 9 as FVTPL.
(c) The transition adjustment relating to loans and advances to customers represents expected credit loss requirement per IFRS 9
(d) The following table analyses the impact, net of tax, of transition to IFRS 9 on reserves and retained earnings. The impact
relates to the fair value reserve and retained earnings. There is no impact on other components of equity.
OVERVIEW BUSINESS REVIEW ANNUAL REPORT & FINANCIAL STATEMENTS OTHER INFORMATION 159
NOTES TO THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS
For the year ended 31 December 2018
3.2 IFRS 9 Financial Instruments (continued)
Classification and measurement of financial assets and financial liabilities (continued)
(e) The transition adjustment under other liabilities relates to expected credit loss on loan commitments and financial guarantee
contracts.
In Nmillion Impact of adopting IFRS 9 at 1 January 2018
Fair value reserve
5,192
Closing balance under IAS 39 (31 December 2017) 107
Recognition of expected credit losses under IFRS 9 for debt financial assets at FVOCI
Reclassification of financial investments (mutual funds) from available-for-sale to FVTPL (154)
Share of non-controlling interest (4)
Opening balance under IFRS 9 (1 January 2018)
5,141
Retained earnings 83,081
Closing balance under IAS 39 (31 December 2017)
Recognition of expected credit losses under IFRS 9 (including lease receivables, loan commitments (10,346)
and financial guarantee contracts) 154
Reclassification of financial investments (mutual funds) from available-for-sale to FVTPL 15
Deferred tax impact 4
Share of non-controlling interest
Opening balance under IFRS 9 (1 January 2018) 72,908
Impact of adopting IFRS 9 at 1 January 2018 on reserves (10,224)
Non-controlling interest
Closing balance under IAS 39 (31 December 2017) 3,158
NCI share of expected credit losses under IFRS 9 (4)
NCI share of IFRS 9 Day 1 adjustment to retained earnings 4
Opening balance under IFRS 9 (1 January 2018)
3,158
160 Stanbic IBTC Annual report for the year ended 31 December 2018
NOTES TO THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS
For the year ended 31 December 2018
(f) The following table reconciles the carrying amounts under IAS 39 to the carrying amounts under IFRS 9 on transition to IFRS 9 on
1 January 2018
IAS 39 Carrying Reclassification Remeasurement IFRS 9 Carrying
Amount Amount
In Nmillion
Financial Assets 31 December 2017 1 January 2018
Amortised cost
Cash and cash equivalents: 401,348 --
- - (2)
Opening balance - - - 401,346
Remeasurement
Closing balance 9,623 ---
Loans and advances to banks: - --
Opening balance - - - 9,623
Remeasurement
Closing balance 372,088 ---
Loans and advances to customers -
Opening balance - (9,561) -
Remeasurement 41,427
Closing balance 824,486 362,527
Other assets
Total amortised cost - 41,427
- (9,563) 814,923
Available-for-sale 32,471 - --
Pledged assets: - (32,471) --
(32,471) --
Opening balance 32,471
To FVOCI – debt (312,773) --
Closing balance 316,641 (2,274) --
Financial investments: - (1,594) --
Opening balance - --
To FVOCI – debt - (316,641)
To FVOCI – equity --
To FVTPL 316,641 --
Closing balance - 345,244
FVOCI - debt - 32,471
Pledged assets:
Opening balance --
From available-for-sale - 312,773
Financial investments: - 345,244
Opening balance
From available-for-sale
Closing balance
OVERVIEW BUSINESS REVIEW ANNUAL REPORT & FINANCIAL STATEMENTS OTHER INFORMATION 161
3.2 IFRS 9 Financial Instruments (continued)
Classification and measurement of financial assets and financial liabilities (continued)
IAS 39 Carrying Reclassification Remeasurement IFRS 9 Carrying
Amount Amount
In Nmillion
FVOCI – equity+ 31 December 2017 1 January 2018
Financial investments:
- 2,274
Opening balance - 2,274 347,518
From available-for-sale 2,274
Closing balance 11,052
Total FVOCI 151,479
10,769
FVTPL 11,052 - -
Derivative assets 151,479 - - 1,594
Trading assets 10,769 - - 174,894
Pledged assets
Financial investments: 1,594 61,721
174,894 - - 753,642
Opening balance
From available-for-sale 74,892
Closing balance 29,046
Total FVTPL
187,503
Financial liabilities 61,721 -- 1,106,804
Amortised cost: 753,642 --
Deposits from banks -- 2,592
Deposits from customers 74,892 -- 62,449
Other borrowings 29,046 65,041
Subordinated debt 676
Other liabilities: 186,827 - 676
Opening balance 1,106,128 --
Remeasurement --
Closing balance 2,592
Total amortised cost 62,449 -
FVTPL 65,041
Derivative liabilities
Trading liabilities
Total FVTPL
+FVOCI - equity represents unquoted equity investments that the group hold for long term strategic purposes.
As permitted by IFRS 9, the group has designated these investment at the date of initial application as measured at FVOCI.
Unlike IAS 39, the accumulated fair value reserve related to these investments will never be reclassified to profit or loss.
162 Stanbic IBTC Annual report for the year ended 31 December 2018
NOTES TO THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS
For the year ended 31 December 2018
Impairment of financial assets in stage 2 are based on lifetime consistency with market practice
expected credit losses (i.e. the in Nigeria, the IFRS 9 impairment
IFRS 9 replaces the ‘incurred loss’ model expected credit losses that result provision calculation has been amended
in IAS 39 with an ‘expected credit loss’ from all possible default events to exclude after write off recoveries
(“ECL”) model. IFRS 9’s expected credit over the expected life of a (“AWOR”) from the loss given default
loss impairment requirements contain the financial instrument). (“LGD”) in calculating the expected
following key conditions: credit loss impairments. This change in
• One of the indicators for a financial the modelling assumption and estimates
• An expected credit loss impairment asset to be included in stage 3 is have been applied prospectively.
allowance is required to be recognised on where there is evidence of default.
financial assets that are measured on an As with loans in stage 2, the • CIB exposures are calculated separately
amortised cost basis or debt instruments impairment loss is based on lifetime based on rating models for each of the
measured at fair value through other expected credit losses (i.e. the asset classes.
comprehensive income (“OCI”), as well as expected credit losses that result
lease receivables, loan commitments and from all possible default events ECL measurement period
financial guarantee contracts. over the expected life of a
financial instrument). • The ECL measurement period for stage
• IFRS 9 introduces a 3-stage 1 exposures is 12-months (or the
approach to calculating impairment • IFRS 9 requires interest income to be remaining tenor of the financial asset
on financial assets: calculated based on the gross carrying for CIB exposures if the remaining
amount for financial assets included lifetime is less than 12-months).
• Impairment losses on instruments within stage 1 and 2 of the impairment
included within stage 1 are based model. The gross carrying amount • A loss allowance over the full lifetime
on 12 month expected credit of a financial asset is its amortised of the financial asset is required if the
losses (i.e. the portion of lifetime cost before deducting its impairment credit risk of that financial instrument
expected credit losses that results allowance. For financial assets within has increased significantly since initial
from default events on a financial stage 3 of the model, interest is recognition (stage 2).
instrument that are possible within required to be calculated based on the
the 12 months after the reporting net carrying amount of the asset. The • A lifetime measurement period is
date). Assets are included within this net carrying amount of a financial asset applied to all credit impaired (stage 3)
stage at initial recognition if they are is its amortised cost after deducting its exposures
not credit impaired (i.e. if they are impairment allowance.
not purchased or originated credit • Lifetimes include consideration for
impaired financial assets). Expected credit loss (“ECL”) on multiple default events, i.e. where
financial assets - IFRS 9 drivers defaulted exposures cure and then
• Financial assets are included within subsequently re-default. This
stage 2 when there has been a For the purpose of determining the ECL: consideration increases the lifetime
significant increase in credit risk periods and the potential ECL.
since initial recognition and the • The PBB portfolios are based on the
assets do not have low credit risk. product categories or subsets of the • The measurement periods for unutilised
Impairment losses on assets included product categories, with tailored loan commitments utilise the same
ECL models per portfolio. To ensure approach as on-balance-sheet
exposures.
OVERVIEW BUSINESS REVIEW ANNUAL REPORT & FINANCIAL STATEMENTS OTHER INFORMATION 163
Significant increase in credit risk exposure. On origination, each client is original measurement categories under IAS
(SICR) and low credit risk assigned a credit risk grade within the 39 and the new measurment categories
group’s 25-point master rating scale. under IFRS 9 for each class of the group’s
PBB Ratings are mapped to PDs by means of financial assets as at 01 January 2018.
calibration formulae that use historical
In accordance with IFRS 9, all exposures default rates and other data for the Incorporation of forward looking
are assessed to determine whether there applicable portfolio. These credit ratings information in ECL measurement
has been SICR at the reporting date, are evaluated at least annually or more
in which case an impairment provision frequently as appropriate. The group determines the macroeconomic
equivalent to the lifetime expected loss outlook, over a planning horizon of at least
is recognised. SICR thresholds, which are CIB exposures are evaluated for SICR by three years, for each country based on the
behaviour score based, are derived for comparing the credit risk grade at the group’s global outlook and its global view
each portfolio vintage of exposures with reporting date to the origination credit of commodities.
similar credit risk and are calibrated over risk grade. Where the relative change
time to determine which exposures reflect in the credit risk grade exceeds certain For PBB these forward looking economic
deterioration relative to the originated pre-defined ratings’ migration thresholds expectations are included in the ECL
population and consequently reflect an (for Investment grade, a significant credit where adjustments are made based on the
increase in credit risk deterioration event is triggered where group’s macro-economic outlook, using
the customer rating migrates by three models that correlate these parameters
The group also determines an appropriate notches or more and the current rating with macro-economic variables. Where
transfer rate of exposures from stage does not fall under the low risk definition modelled correlations are not viable
1 to stage 2 by taking into account the while for below Investment grade one or predictive, adjustments are based
expected levels of arrears status for notche movement applies) or, when a on expert judgement to predict the
similar exposures. The SICR thresholds contractual payment becomes more than outcomes based on the group’s macro-
are reviewed regularly to ensure that they 30 days overdue (IFRS 9’s rebuttable economic outlook expectations. In addition
are appropriately calibrated to identify presumption), the exposure is classified to forward-looking macroeconomic
SICR throughout the life of the exposure within stage 2. These pre-defined information, other types of FLI, such
and consequently facilitate appropriate ratings’ migration thresholds have been as specific event risk, have been taken into
impairment coverage. determined based on historic default account in ECL estimates when required,
experience which indicate that higher through the application of
Where behaviour scores are not available, rated risk exposures are more sensitive to out-of-model adjustment.
historical levels of delinquency are applied SICR than lower risk exposures. Based on
in determining whether there has been an analysis of historic default experience, The group’s macroeconomic outlooks
SICR. For all exposures, IFRS 9’s non- exposures that are classified by the group’s are incorporated in CIB’s client rating and
rebuttable presumption of 30 days past master rating scale as investment grade include specific forward-looking economic
due as well as exposures classified as either are assessed for SICR at each reporting considerations for the individual client. The
debt review or as ‘watch-list’ are used to date but are considered to be of a low client rating thus reflects the expected
classify exposures within stage 2. credit risk for IFRS 9 purposes. client risk for the group’s expectation of
future economic and business conditions.
CIB (including certain PBB business The following tables and the Further adjustments, based on point-in-
accompanying notes below explain the time market data, are made to the PDs
banking exposures) assigned to each risk grade to produce
PDs and ECL representative of existing
The group uses a 25-point master rating market conditions.
scale to quantify the credit risk for each
164 Stanbic IBTC Annual report for the year ended 31 December 2018
NOTES TO THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS
For the year ended 31 December 2018
3.2 IFRS 9 Financial Instruments (continued)
Default As an exception to the above The group’s forward-looking economic
requirements, where the exposure is expectations were applied in the
The definition of default, which triggers secured (or for collateralised structures), determination of the ECL at the
the credit impaired classification (stage 3), the impaired loan can only be written off reporting date:
is based on the group’s internal credit risk once the collateral has been realised. Post
management approach and definitions. realisation of the collateral, the shortfall A range of base, bullish and bearish
Whilst the specific determination of amount can be written off if it meets the forward looking economic expectations
default varies according to the nature second requirement listed above. The were determined, as at 31 December
of the product, it is compliant to the shortfall amount does not need to meet 2018, for inclusion in the group’s forward-
Basel definition of default, and generally the first requirement to be written off looking process and ECL calculation.
determined as occurring at the
earlier of: Curing Nigeria economic expectation
• where, in the group’s view, the Continuous assessment is required to • The base case for Nigeria is that
counterparty is considered to be determine whether the conditions that business and consumer confidence
unlikely to pay amounts due on led to a financial asset being considered ultimately strengthens, and the policy
the due date or shortly thereafter to be credit impaired (i.e. stage 3) still framework incrementally improves,
without recourse to actions such as exist. Distressed restructured financial following the successful completion
the realisation of security; or assets that no longer qualify as credit of the election and implementation of
impaired remain within stage 3 for a structural reforms as outlined in the
• when the counterparty is past due minimum period of six months (i.e. six Economic Recovery and Growth Plan
for more than 90 days (or, in the full consecutive monthly payments per (2017 –2020). Our forecast assumes
case of overdraft facilities in excess the terms and conditions). In the case of that the Government will persist
of the current limit). financial assets with quarterly or longer expected to persist with attempts to
dated repayment terms, the classification reflate the economy through increasing
The group has not rebutted IFRS 9’s 90 of a financial asset out of stage 3 may be fiscal deficit and increasing investment
days past due rebuttable presumption. made subsequent to an evaluation by the spending. In our view, the CBN will
group’s CIB or PBB Credit Governance continue utilising its more effective
Write off policy Committee (as appropriate), such monetary policy tools, such as OMOs, in
evaluation will take into account qualitative a bid to manage inflation and keep the
An impaired loan is written off once factors in addition to compliance with exchange rate steady.
all reasonable attempts at collection payment terms and conditions of the
have been made and there is no agreement. Qualitative factors include
material economic benefit expected compliance with covenants and compliance
from attempting to recover the balance with existing financial asset.
outstanding.
The following criteria must be met before Where it has been determined that a
a financial asset can be written off: financial asset no longer meets the criteria
for significant increase in credit risk, the
• the financial asset has been in default financial asset will be moved from stage 2
for the period defined for the specific (lifetime expected credit loss model) back
product (i.e. VAF, homes loans, to stage 1 (12-month expected credit loss
etc.) which is deemed sufficient to model) prospectively after observation a
determine whether the entity is able to six month retention period.
receive any further economic benefit
from the impaired loan; and
• at the point of write-off, the financial
asset is fully impaired (i.e. 100%
allowance) with no reasonable
expectations of recovery of the asset,
or a portion thereof.
OVERVIEW BUSINESS REVIEW ANNUAL REPORT & FINANCIAL STATEMENTS OTHER INFORMATION 165
• The bearish scenario is based on • The Bull case assumes a more Main Macroeconomic Factors
the economy growing at a slower supportive inflation outlook. Under this
rate which will result in the CBN scenario, the CBN will ease its policy The following table shows the main
tightening the monetary policy rate stance more aggressively over the macroeconomic factors used to estimate
thereby dragging interest rates higher next six to twelve months. The more the allowances for credit losses on loans.
and increase inflation. As a result of supportive inflationary environment For each scenario, namely, the base case,
the significantly elevated inflation should result in an increase in private bullish and bearish scenario, the average
environment the monetary authorities consumption expenditure which will values of the factors over the next 12
will need to increase the pace of its result in increased economic growth. months and over the remaining forecast
tightening cycle, which will result in Government debt is not at levels that period are presented below.
inflation returning close to the steady render it unsustainable. However, the
state base case scenario. As a result attendant reduction in market interest
of the significantly tighter lending rates should encourage government
rate environment, import demand will authorities to boost spending by
initially shrink substantially, leading to increasing borrowing. Under this
a slower pace of depreciation of the scenario, the CBN is expected to
Naira. That said, USD/NGN is expected continue managing the USD/NGN as a
to trend towards the base case towards result the grind higher will only be slow
the end of the forecast horizon.
Base scenario Bearish scenario Bullish scenario
Macroeconomic factors Next 12 Remaining Next 12 Remaining Next 12 Remaining
months forecast months forecast months forecast
Inflation period period period
Real GDP 9.49
Sovereign Rating 2.06 9.6 14.49 12.6 8.49 8.6
Policy Rate
Exchange rate (USDNGN) B+ 3.32 1.56 2.52 2.56 4.12
Equity index 12
365 B+ B+ B+ B+ B+
36,328.86
11 16 14 11 11
420 370 440 360 400
46,256.52 35,328.86 44,756.52 37,328.86 47,756.52
ECL held for unutilised client exposures and guarantees: The IFRS 9 requirement for impairments for unutilised client facilities and
guarantees results in additional balance sheet impairments for both PBB and CIB.
Longer outlook period for exposures that are expected to default: Measurement of ECL over a longer time horizon results in the
potential for higher loss outcomes which has a greater impact for PBB than CIB.
Forward looking economic expectations for ECL: The inclusion of forward-looking economic information is expected to increase the
level of provisions as a result of the nature and timing of both current and forecasted economic assumptions.
166 Stanbic IBTC Annual report for the year ended 31 December 2018
NOTES TO THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS
For the year ended 31 December 2018
3.2 IFRS 9 Financial Instruments (continued)
Impact of the new impairment model
For assets in the scope of the IFRS 9 impairment model, impairment losses are generally expected to increase and become more volatile.
The group has determined that the application of IFRS 9’s impairment requirements as at 01 January 2018 resulted in an additional
impairment allowance as follows.
Amounts in Nmillions 31,764
Impairment allowance as at 31 December 2017 under IAS 39 10,346
Additional impairment recognised at 01 January 2018 on:
Loans and advances to customers 9,561
Debt instruments at FVOCI 107
Cash and cash equivalents 2
Loan commitments and financial guarantee contracts 676
Impairment allowance as at 01 January 2018 under IFRS 9
42,110
Loans and advances to customers - IFRS 9 exposure and stage distribution at 01 January 2018
Gross carrying value- In Nmillions Stage 1 Stage 2 Stage 3 Total
PBB 100,066 32,304 16,955 149,325
Mortgage loans 1,448
Instalment sale and finance leases 4,862 1,116 4,244 7,426
Card debtors 4,427 3,496 12,167
Personal unsecured lending 313 1,451
Business lending and other - Customers 742 396 6,010 44,474
31,356 7,108 4,940 83,807
58,679 20,188
CTB 179,362 56,798 18,367 254,527
Corporate lending 179,362 56,798 18,367 254,527
Loans and advances to customers 279,428 89,102 35,322 403,852
The following table reconciles the closing impairment allowance for financial assets in accordance with IAS 39 and provisions for loan
commitments and financial guarantee contracts in accordance with IAS 37 Provisions, Contingent Liabilities and Contingent Assets as
at 31 December 2017; to the opening ECL allowance determined in accordance with IFRS 9 as at 1 January 2018.
Expected credit loss Portfolio Specific Total IAS 39 12 month Lifetime Lifetime Total IFRS 9 Transitional
impairment impairment impairment ECL ECL not ECL credit impairment adjustment
Financial instruments subject
to expected credit loss (IAS 39) (IAS 39) provision credit impaired provision
requirements of IFRS 9 impaired
As at 31 December 2017 N’million N’million N’million N’million N’million N’million N’million N’million
Financial assets at amortised - - - 2 - - 2 2
cost or Debt instruments at - - - 13 - - 13 13
FVOCI - - - - -
Cash and cash equivalents - - - 94 - - 94 94
Pledged assets - - -
Financial investments 10,847 20,916 31,763 15,796 20,915
Loans and advances to banks - 5,032 5,032 4,613 - 5,032 41,324 9,561
Loans and advances to customers - - - 5,032 -
Other assets - 141 -
Off Balance sheet (Not at FVTPL) 10,847 25,948 36,795 535 15,937 25,947 676 676
5,257 47,141 10,346
OVERVIEW BUSINESS REVIEW ANNUAL REPORT & FINANCIAL STATEMENTS OTHER INFORMATION 167
4. Statement of significant accounting policies
Except for the changes explained in note 3, the group has consistently applied the following accounting policies to all periods presented
in these consolidated and separate annual financial statements.
4.1 Basis of consolidation
Basis of consolidation
Subsidiaries Common control
transactions
Separate Consolidated Acquisitions Disposal of a Partial Initial
financial financial subsidiary disposal of a measurement
statements subsidiary
statements of NCI
interest
Subsidiaries
(including mutual funds, in which the group has both an irrevocable asset management agreement and a significant
investment)
Separate financial statements Consolidated financial statements
Investments in subsidiaries are accounted for at cost less The accounting policies of subsidiaries that are consolidated by
accumulated impairment losses (where applicable) in the the group conform to the group’s accounting policies. Intragroup
separate financial statements. The carrying amounts of these transactions, balances and unrealised gains (losses) are eliminated
investments are reviewed annually for impairment indicators on consolidation. Unrealised losses are eliminated in the same
and, where an indicator of impairment exists, are impaired to manner as unrealised gains, but only to the extent that there is no
the higher of the investment’s fair value less costs to sell and evidence of impairment. The proportion of comprehensive income
value in use. and changes in equity allocated to the group and non controlling
interests (“NCI”) are determined on the basis of the group’s
present ownership interest in the subsidiary.
168 Stanbic IBTC Annual report for the year ended 31 December 2018
NOTES TO THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS
For the year ended 31 December 2018
Acquisitions Subsidiaries are entities controlled by the group and are consolidated from the date on which the group acquires control up
to the date that control is lost. The group controls an entity if it is exposed to, or has the rights to variable returns from its
Loss of control involvement with the entity and has the ability to affect those returns through its power over the entity. Control is assessed on
in a subsidiary a continuous basis. For mutual funds the group further assesses its control by considering the existence of either voting rights
Partial disposal or significant economic power.
of a subsidiary
Initial measurement The acquisition method of accounting is used to account for the acquisition of subsidiaries by the group. The consideration
of NCI transferred is measured as the sum of the fair value of the assets given, equity instruments issued and liabilities incurred
or assumed at the acquisition date. The consideration includes any asset, liability or equity resulting from a contingent
consideration arrangement. The obligation to pay contingent consideration is classified as either a liability or equity based on
the terms of the arrangement. The right to a return of previously transferred consideration is classified as an asset. Transaction
costs are recognised within profit or loss as and when they are incurred. Where the initial accounting is incomplete by the end
of the reporting period in which the business combination occurs (but no later than 12 months since the acquisition date), the
group reports provisional amounts.
Where applicable, the group adjusts retrospectively the provisional amounts to reflect new information obtained about facts
and circumstances that existed at the acquisition date and affected the measurement of the provisional amounts. Identifiable
assets acquired, liabilities and contingent liabilities assumed in a business combination are measured initially at their fair
values at the acquisition date, irrespective of the extent of any NCI. The excess (shortage) of the sum of the consideration
transferred (including contingent consideration), the value of NCI recognised and the acquisition date fair value of any
previously held equity interest in the subsidiary over the fair value of identifiable net assets acquired is recorded as goodwill
in the statement of financial position (gain on bargain purchase, which is recognised directly in profit or loss).When a business
combination occurs in stages, the previously held equity interest is remeasured to fair value at the acquisition date and any
resulting gain or loss is recognised in profit or loss.
Increases in the group’s interest in a subsidiary, when the group already has control, are accounted for as transactions with
equity holders of the group. The difference between the purchase consideration and the group’s proportionate share of the
subsidiary’s additional net asset value acquired is accounted for directly in equity.
A disposal arises where the group loses control of a subsidiary. When the group loses control of a subsidiary, the profit or loss
on disposal is calculated as the difference between the fair value of the consideration received (including the fair value of
any retained interest in the underlying investee) and the carrying amount of the assets and liabilities and any non-controlling
interest. Any gains or losses in OCI that relate to the subsidiary are reclassified to profit or loss at the time of the disposal. On
disposal of a subsidiary that includes a foreign operation, the relevant amount in the FCTR is reclassified to profit or loss at the
time at which the profit or loss on disposal of the foreign operation is recognised.
A partial disposal arises as a result of a reduction in the group’s ownership interest in an investee that is not a disposal (i.e.
a reduction in the group’s interest in a subsidiary whilst retaining control). Decreases in the group’s interest in a subsidiary,
where the group retains control, are accounted for as transactions with equity holders of the group. Gains or losses on the
partial disposal of the group’s interest in a subsidiary are computed as the difference between the sales consideration and the
group’s proportionate share of the investee’s net asset value disposed of, and are accounted for directly in equity.
The group elects on each acquisition to initially measure NCI on the acquisition date at either fair value or at the NCI’s
proportionate share of the investees’ identifiable net assets.
OVERVIEW BUSINESS REVIEW ANNUAL REPORT & FINANCIAL STATEMENTS OTHER INFORMATION 169
4. Statement of significant accounting policies (continued)
Common control transactions In the case of foreign currency gains and 4.2 Cash and equivalents
losses on debt instruments classified as
Common control transactions, in which available for sale and FVOCI, a distinction Cash and cash equivalents
the company is the ultimate parent entity is made between foreign currency
both before and after the transaction, differences resulting from changes in Cash and cash equivalents presented in
are accounted for at book value. amortised cost of the security and other the statement of cash flows consist of
changes in the carrying amount of the cash and balances with central banks
Foreign currency translations security. Foreign currency differences (excluding cash reserve), and balances with
related to changes in the amortised cost other banks with original maturities of 3
Foreign currency transactions are are recognised in profit or loss, and other months or less from the date of acquisition
translated into the respective group changes in the carrying amount, except that are subject to an insignificant risk
entities’ functional currencies at impairment, are recognised in equity. of changes in their fair values and are
exchange rates prevailing at the date For available for sale and FVOCI equity used by management to fulfill short term
of the transactions. investments, foreign currency differences commitments. Cash and balances with
are recognised in OCI and cannot be central banks comprise coins and bank
Foreign exchange gains and losses reclassified to profit/loss from 1 January notes, balances with central banks and
resulting from the settlement of such 2018 in line with IFRS 9. other short term investments.
transactions and from the translation
of monetary assets and liabilities Foreign currency gains and losses on
denominated in foreign currencies at intragroup loans are recognised in profit
period-end exchange rates, are recognised or loss except where the settlement of the
in profit or loss. loan is neither planned nor likely to occur
in the foreseeable future.
Non-monetary assets and liabilities
denominated in foreign currencies that are
measured at historical cost are translated
using the exchange rate at the transaction
date, and those measured at fair value are
translated at the exchange rate at
the date that the fair value was
determined. Exchange rate differences
on non-monetary items are accounted
for based on the classification of the
underlying items.
170 Stanbic IBTC Annual report for the year ended 31 December 2018
NOTES TO THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS
For the year ended 31 December 2018
4.3 Financial Instruments
Policy applicable before 1 January 2018
The relevant financial instruments are financial assets held for trading, available for sale financial assets, loans and receivables and
other liabilities.
Financial Instruments
Financial assets Financial liabilities Financial guarantee Derivatives and Other
contracts embedded derivatives
Reclassification Held to maturity Designated at fair value Sale and repurchase
Impairment Loan and receivable through profit or loss agreements
Held for trading Offsetting
Available for sale Amortised cost Pledged assets
Held for trading
Designated at fair value
through profit or loss
Recognition and initial measurement – financial instruments
All financial instruments are measured initially at fair value plus directly attributable transaction costs and fees, except for those financial
instruments that are subsequently measured at fair value through profit or loss where such transaction costs and fees are immediately
recognised in profit or loss. Financial instruments are recognised (derecognised) on the date the group commits to purchase (sell) the
instruments (trade date accounting).
OVERVIEW BUSINESS REVIEW ANNUAL REPORT & FINANCIAL STATEMENTS OTHER INFORMATION 171
Financial assets
Held to maturity Non-derivative financial assets with fixed or determinable payments and fixed maturities that management has
Loans and receivables both the positive intent and ability to hold to maturity.
Held for trading
Non-derivative financial assets with fixed or determinable payments that are not quoted in an active market, other
Designated at fair than those classified as at fair value through profit or loss or available-for-sale.
value through profit
or loss Those financial assets acquired principally for the purpose of selling in the near term, those that form part of a
portfolio of identified financial instruments that are managed together and for which there is evidence of a recent
Available for sale actual pattern of short-term profit taking.
Financial assets are designated to be measured at fair value in the following instances:
• to eliminate or significantly reduce an accounting mismatch that would otherwise arise
• where the financial assets are managed and their performance evaluated and reported on a fair value basis
• where the financial asset contains one or more embedded derivatives that significantly modify the financial
asset’s cash flows.
Financial assets that are not classified into one of the above-mentioned financial asset categories.
Subsequent measurement
Subsequent to initial measurement, financial assets are classified in their respective categories and measured at either amortised cost or
fair value as follows:
Held to maturity and Amortised cost using the effective interest method with interest recognised in interest income, less any
Loans and receivables impairment losses which are recognised as part of credit impairment charges.
Available for sale Directly attributable transaction costs and fees received are capitalised and amortised through interest income as
part of the effective interest rate.
Held for trading
Designated at fair Fair value, with changes in fair value recognised directly in the available-for-sale reserve until the financial asset is
value through profit derecognised or impaired.
or loss
Interest income on debt financial assets is recognised in profit and loss in terms of the effective interest rate method.
Dividends received on equity available-for-sale financial assets are recognised in other revenue within profit or loss.
When debt (equity) available-for-sale financial assets are disposed of, the cumulative fair value adjustments in OCI
are reclassified to interest income (other revenue).
Fair value, with gains and losses arising from changes in fair value) (including interest and dividends) recognised in
trading revenue.
Fair value, with gains and losses recognised in interest income for all debt financial assets and in other revenue within
non-interest revenue for all equity instruments.
172 Stanbic IBTC Annual report for the year ended 31 December 2018
NOTES TO THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS
For the year ended 31 December 2018
4. Statement of significant accounting policies (continued)
Impairment reporting date whether there is objective evidence that a financial
asset, which is either carried at amortised cost or classified as
A financial asset is impaired if objective evidence indicates that available-for-sale, is impaired as follows:
a loss event has occurred after initial recognition, which has a
negative effect on the estimated future cash flows of the financial
asset that can be estimated reliably. The group assesses at each
Held to maturity and The following criteria are used by the group in determining whether there is objective evidence of
Loans and receivables impairment for loans or groups of loans include:
• known cash flow difficulties experienced by the borrower;
• a breach of contract, such as default or delinquency in interest and/or principal payments;
• breaches of loan covenants or conditions;
• it becoming probable that the borrower will enter bankruptcy or other financial reorganisation; and
• where the group, for economic or legal reasons relating to the borrower’s financial difficulty, grants
the borrower a concession that the group would not otherwise consider.
The group first assesses whether there is objective evidence of impairment individually for loans that
are individually significant, and individually or collectively for loans that are not individually significant.
Non-performing loans include those loans for which the group has identified objective evidence of
default, such as a breach of a material loan covenant or condition as well as those loans for which
instalments are due and unpaid for 90 days or more. The impairment of non-performing loans takes
into account past loss experience adjusted for changes in economic conditions and the nature and level
of risk exposure since the recording of the historic losses.
When a loan carried at amortised cost has been identified as specifically impaired, the carrying
amount of the loan is reduced to an amount equal to the present value of its estimated future cash
flows, including the recoverable amount of any collateral, discounted at the financial asset’s original
effective interest rate. The carrying amount of the loan is reduced through the use of a specific credit
impairment account and the loss is recognised as a credit impairment charge in profit or loss.
Increases in loan impairments and any subsequent reversals thereof, or recoveries of amounts
previously impaired (including loans that have been written off), are reflected within credit impairment
charges in profit or loss. Subsequent to impairment, the effects of discounting unwind over time as
interest income.
The calculation of the present value of the estimated future cash flows of collateralised financial assets
recognised on an amortised cost basis includes cash flows that may result from foreclosure less costs of
obtaining and selling the collateral, whether or not foreclosure is probable.
If the group determines that no objective evidence of impairment exists for an individually assessed
loan, whether significant or not, it includes the loan in a group of financial loans with similar credit
risk characteristics and collectively assesses for impairment. Loans that are individually assessed for
impairment and for which an impairment loss is recognised are not included in a collective assessment
for impairment.
Impairment of groups of loans that are assessed collectively is recognised where there is objective
evidence that a loss event has occurred after the initial recognition of the group of loans but
before the reporting date. In order to provide for latent losses in a group of loans that have not yet
been identified as specifically impaired, a credit impairment for incurred but not reported losses is
recognised based on historic loss patterns and estimated emergence periods (time period between
the loss trigger events and the date on which the group identifies the losses). Groups of loans are also
impaired when adverse economic conditions develop after initial recognition, which may impact future
cash flows. The carrying amount of groups of loans is reduced through the use of a portfolio credit
impairment account and the loss is recognised as a credit impairment charge in profit or loss.
Previously impaired loans are written off once all reasonable attempts at collection have been made
and there is no realistic prospect of recovering outstanding amounts.
OVERVIEW BUSINESS REVIEW ANNUAL REPORT & FINANCIAL STATEMENTS OTHER INFORMATION 173
Available for sale Available-for-sale debt instruments are impaired when there has been an adverse effect in fair value of
the instrument below its cost and for equity instruments where there is information about significant or
prolonged changes with an adverse effect on the environment in which the issuer operates that indicates
that the cost of the investment in the equity instrument may not be recovered.
When an available for sale asset has been identified as impaired, the cumulative loss, measured as the
difference between the acquisition price and the current fair value, less any previously recognised
impairment losses on that financial asset, is reclassified from OCI to profit or loss.
If, in a subsequent period, the amount relating to an impairment loss decreases and the decrease can be
linked objectively to an event occurring after the impairment loss was recognised, where the instrument is
a debt instrument, the impairment loss is reversed through profit or loss. An impairment loss in respect of
an equity instrument classified as available-for-sale is not reversed through profit or loss but accounted for
directly in OCI.
Reclassification
Reclassifications of financial assets are permitted only in the following instances:
Held to maturity Where the group is to sell more than an insignificant amount of held-to-maturity investments, the entire
Loans and receivables category would be tainted and reclassified from held-to-maturity to available-for-sale assets with the difference
Held for trading between amortised cost and fair value being accounted for in OCI.
The group may choose to reclassify financial assets that would meet the definition of loans and receivables if the
group, at the date of reclassification, has the intention and ability to hold these financial assets for the foreseeable
future or until maturity.
The group may elect to reclassify non-derivative financial assets out of held-for-trading category in the
following instances:
if the financial asset is no longer held for the purpose of selling it in the near term and the financial asset would
not otherwise have met the definition of loans and receivables, it is permitted to be reclassified only in rare
circumstances if the financial asset is no longer held for the purpose of selling it in the near team and the financial
asset would have met the definition of loans and receivables, it is permitted to be reclassified if the group, at the
date of reclassification, has the intention and ability to hold these financial assets for the foreseeable future or
until maturity.
Reclassifications are made at fair value as of the reclassification date. Effective interest rates for financial assets reclassified to loans
and receivables, held-to-maturity and available-for-sale categories are determined at the reclassification date. Subsequent changes
in estimates of cash flows (other than credit impairment changes) adjust the financial asset’s effective interest rates prospectively.
On reclassification of a trading asset, all embedded derivatives are reassessed and, if necessary, accounted for separately.
174 Stanbic IBTC Annual report for the year ended 31 December 2018
NOTES TO THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS
For the year ended 31 December 2018
4. Statement of significant accounting policies (continued)
Financial liabilities
Nature Those financial liabilities incurred principally for the purpose of re-purchasing in the near term, those that form
Held for trading part of a portfolio of identified financial instruments that are managed together and for which there is evidence
of a recent actual pattern of short-term profit taking.
Designated at fair
value through profit Financial liabilities are designated to be measured at fair value in the following instances:
or loss
• to eliminate or significantly reduce an accounting mismatch that would otherwise arise
At amortised cost
• where the financial liabilities are managed and their performance evaluated and reported on a fair value basis
• where the financial liability contains one or more embedded derivatives that significantly modify the financial
liability’s cash flows.
All other financial liabilities not included the above categories.
Subsequent measurement
Subsequent to initial measurement, financial liabilities are classified in their respective categories and measured at either amortised cost or
fair value as follows:
Held for trading Fair value, with gains and losses arising from changes in fair value (including interest and dividends) recognised in
trading revenue.
Designated at fair Fair value, with gains and losses arising from changes in fair value (including interest and dividends) recognised in
value through profit interest expense.
or loss
At amortised cost Amortised cost using the effective interest method with interest recognised in interest expense.
Derecognition of financial assets and liabilities
Financial assets and liabilities are derecognised in the following instances:
Financial assets Financial assets are derecognised when the contractual rights to receive cash flows from the financial assets have
derecognition expired, or where the group has transferred its contractual rights to receive cash flows on the financial asset such
that it has transferred substantially all the risks and rewards of ownership of the financial asset. Any interest in
transferred financial assets that is created or retained by the group is recognised as a separate asset or liability.
The group enters into transactions whereby it transfers assets recognised in its statement of financial position,
but retains either all or a portion of the risks or rewards of the transferred assets. If all or substantially all risks
and rewards are retained, then the transferred assets are not derecognised. Transfers of assets with the retention
of all or substantially all risks and rewards include securities lending and repurchase agreements.
Financial liabilities In transfers where control over the asset is retained, the group continues to recognise the asset to the extent
of its continuing involvement, determined by the extent to which it is exposed to changes in the value of the
transferred asset.
Financial liabilities are derecognised when the obligation of the financial liabilities are extinguished, that is, when the
obligation is discharged, cancelled or expires.
OVERVIEW BUSINESS REVIEW ANNUAL REPORT & FINANCIAL STATEMENTS OTHER INFORMATION 175
Modification of financial assets and liabilities
Where an existing financial asset or liability is replaced by another with the same counterparty on substantially different terms, or the
terms of an existing financial asset or liability are substantially modified, such an exchange or modification is treated as a derecognition of
the original asset or liability and the recognition of a new asset or liability, with the difference in the respective carrying amounts being
recognised in profit or loss. In all other instances, the renegotiated asset or liability’s effective interest rate is redetermined at date of
modification taking into account the renegotiated terms.
4.3 Financial instruments
Policy applicable after 1 January 2018
The relevant financial instruments are financial assets classified at amortised cost, fair value through OCI, fair value through P/L and
other liabilities.
Financial Instruments
Financial assets Financial liabilities Financial guarantee Derivatives and Other
contracts embedded derivatives Sale and repurchase
Reclassification Amortised cost Designated at fair value agreements
Impairment Fair value through OCI through profit or loss Offsetting
Held for trading Pledged assets
Fair value through PL Amortised cost
Held for trading
Designated at fair value
through profit or loss
Fair value through
profit or loss default
Recognition and initial measurement – financial instruments
All financial instruments are measured initially at fair value plus directly attributable transaction costs and fees, except for those financial
instruments that are subsequently measured at fair value through profit or loss where such transaction costs and fees are immediately
recognised in profit or loss. Financial instruments are recognised (derecognised) on the date the group commits to purchase (sell) the
instruments (trade date accounting).
176 Stanbic IBTC Annual report for the year ended 31 December 2018
NOTES TO THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS
For the year ended 31 December 2018
4. Statement of significant accounting policies (continued)
Financial assets
Amortised cost A debt instrument that meets both of the following conditions (other than those designated at
fair value through profit or loss):
• held within a business model whose objective is to hold the debt instrument (financial asset) in order to
collect contractual cash flows; and
• The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments
of principal and interest on the principal amount outstanding.
This assessment includes determining the objective of holding the asset and whether the contractual cash flows
are consistent with a basic lending arrangement. Where the contractual terms introduce exposure to risk or
volatility that are not considered de minimis and are inconsistent with a basis lending arrangement, the financial
asset is classified as fair value through profit or loss – default.
Fair value through OCI Includes:
• A debt instrument that meets both of the following conditions (other than those designated at fair value through
profit or loss):
• held within a business model in which the debt instrument (financial asset) is managed to both collect
contractual cash flows and sell financial assets; and
• the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments
of principal and interest on the principal amount outstanding.
This assessment includes determining the objective of holding the asset and whether the contractual cash flows are
consistent with a basic lending arrangement. Where the contractual terms introduce exposure to risk or volatility that
are not considered de minimis and are inconsistent with a basis lending arrangement, the financial asset is classified
as fair value through profit or loss – default.
• Equity financial assets which are not held for trading and are irrevocably elected (on an instrument-by-instrument
basis) to be presented at fair value through OCI.
Held for trading Those financial assets acquired principally for the purpose of selling in the near term, those that form part of a
portfolio of identified financial instruments that are managed together and for which there is evidence of a recent
actual pattern of short-term profit taking.
Designated at fair Financial assets are designated to be measured at fair value in the following instances:
value through profit • to eliminate or significantly reduce an accounting mismatch that would otherwise arise
or loss • where the financial assets are managed and their performance evaluated and reported on a fair value basis
• where the financial asset contains one or more embedded derivatives that significantly modify the financial
asset’s cash flows.
Fair value through Financial assets that are not classified into one of the above-mentioned financial asset categories.
profit or loss default
OVERVIEW BUSINESS REVIEW ANNUAL REPORT & FINANCIAL STATEMENTS OTHER INFORMATION 177
Subsequent measurement
Subsequent to initial measurement, financial assets are classified in their respective categories and measured at either amortised cost or fair
value as follows:
Amortised cost Amortised cost using the effective interest method with interest recognised in interest income, less any
impairment losses which are recognised as part of credit impairment charges.
Fair value through OCI
Directly attributable transaction costs and fees received are capitalised and amortised through interest income as
Held for trading part of the effective interest rate.
Designated at fair
value through profit Debt instrument: Fair value, with gains and losses recognised directly in the fair value through OCI reserve.
or loss When a debt financial asset is disposed of, the cumulative fair value adjustments, previously recognised in OCI,
Fair value through are reclassified to the other gains and losses on financial instruments within non-interest revenue.
profit or loss-default
Interest income on debt financial asset is recognised in interest income in terms of the effective interest rate
method. Dividends received are recognised in interest income within profit or loss.
Equity instrument: Fair value, with gains and losses recognised directly in the fair value through OCI reserve.
When equity financial assets are disposed of, the cumulative fair value adjustments in OCI are reclassified within
reserves to retained income.
Dividends received on equity instruments are recognised in other revenue within non-interest income.
Fair value, with gains and losses arising from changes in fair value) (including interest and dividends) are recognised in
trading revenue.
Fair value gains and losses (including interest and dividends) on the financial asset are recognised in the income
statement as part of other gains and losses on financial instruments within non-interest revenue.
Fair value gains and losses (including interest and dividends) on the financial asset are recognised in the income
statement as part of other gains and losses on financial instruments within non-interest revenue.
Impairment
Expected credit losses (“ECL”) are recognised on debt financial risk (“SICR”) at the reporting date which includes forward-looking
assets classified as at either amortised cost or fair value through information that is available without undue cost or effort at the
OCI, financial guarantee contracts that are not designated at fair reporting date about past events, current conditions and forecasts
value through profit or loss as well as loan commitments that of future economic conditions. The measurement basis of the
are neither measured at fair value through profit or loss nor are ECL, which is set out in the table that follows, is measured as the
used to provide a loan at a below market interest rate. unbiased and probability weighted amount that is determined by
The measurement basis of the ECL of a financial asset includes evaluating a range of possible outcomes, the time value of money
assessing whether there has been a significant increase in credit and forward looking information.
Stage 1 A 12-month ECL is calculated for financial assets which are neither credit-impaired on origination nor for which
Stage 2 there has been a SICR.
Stage 3
A lifetime ECL allowance is calculated for financial assets that are assessed to have displayed a SICR since origination
and are not considered low credit risk.
A lifetime ECL is calculated for financial assets that are assessed to be credit impaired. The following criteria are used
in determining whether the financial asset is impaired:
• default
• significant financial difficulty of borrower and/or modification
• probability of bankruptcy or financial reorganisation
• disappearance of an active market due to financial difficulties.
178 Stanbic IBTC Annual report for the year ended 31 December 2018
NOTES TO THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS
For the year ended 31 December 2018
4. Statement of significant accounting policies (continued)
The key components of the impairment methodology are described as follows:
Significant increase in At each reporting date the group assesses whether the credit risk of its exposures has increased significantly
credit risk (SICR) since initial recognition by considering the change in the risk of default occurring over the expected life of the
Low credit risk financial asset.
Default
Credit risk of exposures which are overdue for more than 30 days are also considered to have increased
Forward-looking significantly.
information
Write-off Exposures are generally considered to have a low credit risk where there is a low risk of default, the exposure has
a strong capacity to meet its contractual cash flow obligations and adverse changes in economic and business
conditions may not necessarily reduce the exposure’s ability to fulfil its contractual obligations.
The group’s definition of default has been aligned to its internal credit risk management definitions and approaches.
A financial asset is considered to be in default when there is objective evidence of impairment. The following criteria
are used in determining whether there is objective evidence of impairment for financial assets or groups of financial
assets:
• significant financial difficulty of borrower and/or modification (i.e. known cash flow difficulties experienced by
the borrower)
• a breach of contract, such as default or delinquency in interest and/or principal payments
• disappearance of active market due to financial difficulties
• it becomes probable that the borrower will enter bankruptcy or other financial reorganisation
• where the group, for economic or legal reasons relating to the borrower’s financial difficulty, grants the borrower
a concession that the group would not otherwise consider.
Exposures which are overdue for more than 90 days are also considered to be in default.
Forward looking information is incorporated into the group’s impairment methodology calculations and in the group’s
assessment of SICR. The group includes all forward looking information which is reasonable and available without
undue cost or effort. The information will typically include expected macro-economic conditions and factors that are
expected to impact portfolios or individual counterparty exposures.
Financial assets are written off when there is no reasonable expectation of recovery. Financial assets which are
written off may still be subject to enforcement activities.
ECLs are recognised within the statement of financial position as follows:
Financial assets Recognised as a deduction from the gross carrying amount of the asset (group of assets). Where the impairment
measured at amortised allowance exceeds the gross carrying amount of the asset (group of assets), the excess is recognised as a
cost (including loan provision within other liabilities.
commitments)
Off-balance sheet Recognised as a provision within provisions.
exposures (excluding
loan commitments)
Financial assets Recognised in the fair value reserve within equity. The carrying value of the financial asset is recognised in the
measured at fair value statement of financial position at fair value.
through OCI
OVERVIEW BUSINESS REVIEW ANNUAL REPORT & FINANCIAL STATEMENTS OTHER INFORMATION 179
Reclassification
Reclassifications of financial assets are permitted only in the following instances:
Reclassifications of debt financial assets are permitted when, and only when, the group changes its business
model for managing financial assets, in which case all affected financial assets are reclassified. Reclassifications are
accounted for prospectively from the date of reclassification as follows:
• Financial assets that are reclassified from amortised cost to fair value are measured at fair value at the date of
reclassification with any difference in measurement basis being recognised in other gains and losses on financial
instruments
• The fair value of a financial asset that is reclassified from fair value to amortised cost becomes the financial asset’s
new carrying value
• Financial assets that are reclassified from amortised cost to fair value through OCI are measured at fair value at
the date of reclassification with any difference in measurement basis being recognised in OCI
• The fair value of a financial asset that is reclassified from fair value through OCI to amortised cost becomes the
financial asset’s new carrying value with the cumulative fair value adjustment recognised in OCI being recognised
against the new carrying value
• The carrying value of financial assets that are reclassified from fair value through profit or loss to fair value
through OCI remains at fair value
• The carrying value of financial assets that are reclassified from fair value through OCI to fair value through profit
or loss remains at fair value, with the cumulative fair value adjustment in OCI being recognised in the income
statement at the date of reclassification.
Financial liabilities
Nature
Held for trading Those financial liabilities incurred principally for the purpose of re-purchasing in the near term, those
that form part of a portfolio of identified financial instruments that are managed together and for which
Designated at fair there is evidence of a recent actual pattern of short-term profit taking.
value through profit
or loss Financial liabilities are designated to be measured at fair value in the following instances:
• to eliminate or significantly reduce an accounting mismatch that would otherwise arise
At amortised cost • where the financial liabilities are managed and their performance evaluated and reported on a fair value basis
• where the financial liability contains one or more embedded derivatives that significantly modify the financial
asset’s cash flows.
All other financial liabilities not included the above categories.
Subsequent measurement
Subsequent to initial measurement, financial liabilities are classified in their respective categories and measured at either amortised cost
or fair value as follows:
Held for trading Fair value, with gains and losses arising from changes in fair value) (including interest and dividends)
recognised in trading revenue.
Designated at fair Fair value, with gains and losses arising from changes in fair value (including interest and dividends) recognised in
value through profit interest expense.
or loss
At amortised cost Amortised cost using the effective interest method with interest recognised in interest expense.
180 Stanbic IBTC Annual report for the year ended 31 December 2018
NOTES TO THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS
For the year ended 31 December 2018
4. Statement of significant accounting policies (continued)
Derecognition of financial assets and liabilities
Financial assets and liabilities are derecognised in the following instances:
Financial assets Financial assets are derecognised when the contractual rights to receive cash flows from the financial assets have
Financial liabilities expired, or where the group has transferred its contractual rights to receive cash flows on the financial asset such
that it has transferred substantially all the risks and rewards of ownership of the financial asset. Any interest in
transferred financial assets that is created or retained by the group is recognised as a separate asset or liability.
The group enters into transactions whereby it transfers assets recognised in its statement of financial position,
but retains either all or a portion of the risks or rewards of the transferred assets. If all or substantially all risks
and rewards are retained, then the transferred assets are not derecognised. Transfers of assets with the retention
of all or substantially all risks and rewards include securities lending and repurchase agreements.
In transfers where control over the asset is retained, the group continues to recognise the asset to the extent
of its continuing involvement, determined by the extent to which it is exposed to changes in the value of the
transferred asset. From 1 January 2018 any cummulative gain/loss recognised in OCI in respect of equity
investment securities designated at FVOCI is not recognised in profit or loss on derecognition of such securities.
Financial liabilities are derecognised when the obligation of the financial liabilities are extinguished,
that is, when the obligation is discharged, cancelled or expires.
Modification of financial assets recognised as a modification gain or loss After 1 January 2018
and liabilities within credit impairments (for distressed
financial asset modifications) or gains • the ECL calculated for the financial
Where an existing financial asset or liability and losses on financial instruments guarantee; and
is replaced by another with the same within non-interest revenue (for all other
counterparty on substantially different modifications). • unamortised premium.
terms, or the terms of an existing financial
asset or liability are substantially modified, Financial guarantee contracts Derivatives and embedded derivatives
such an exchange or modification is
treated as a derecognition of the original A financial guarantee contract is a A derivative is a financial instrument
asset or liability and the recognition of contract that requires the group (issuer) whose fair value changes in response to
a new asset or liability at fair value and to make specified payments to reimburse an underlying variable, requires no initial
recalculates a new effective interest rate, the holder for a loss it incurs because a net investment or an initial net investment
with the difference in the respective specified debtor fails to make payment that is smaller than would be required for
carrying amounts being recognised when due in accordance with the original other types of contracts that would be
in other gains and losses on financial or modified terms of a debt instrument. expected to have a similar response to
instruments within non-interest revenue. changes in market factors and is settled
The date of recognition of a new asset Financial guarantee contracts are initially at a future date. Derivatives are initially
is consequently considered to be the recognised at fair value, which is generally recognised at fair value on the date on
date of initial recognition for impairment equal to the premium received, and then which the derivatives are entered into and
calculation purposes. amortised over the life of the financial subsequently remeasured at fair value.
guarantee. Financial guarantee contracts
If the terms are not substantially different are subsequently measured at the higher All derivative instruments are carried as
for financial assets or financial liabilities, of the: financial assets when the fair value is
the group recalculates the new gross positive and as financial liabilities when the
carrying amount by discounting the Before 1 January 2018 fair value is negative, subject to offsetting
modified cash flows of the financial asset principles as described under the heading
or financial liability using the original • present value of any expected payment, “Offsetting” below.
effective interest rate. The difference when a payment under the guarantee has
between the new gross carrying amount become probable; and All gains and losses from changes in
and the original gross carrying amount is the fair values of derivatives are
• unamortised premium. recognised immediately in profit or loss
as trading revenue.
OVERVIEW BUSINESS REVIEW ANNUAL REPORT & FINANCIAL STATEMENTS OTHER INFORMATION 181
Other Securities purchased under agreements to 4.4 Rules issued by the Financial
resell (reverse repurchase agreements), at Reporting Council of Nigeria
Pledged assets either a fixed price or the purchase price
plus a lender’s rate of return, are recorded Transactions requiring registration from
Financial assets transferred to external as loans and included under trading assets statutory bodies such as the National
parties that do not qualify for de- or loans and advances, as appropriate. Office for Technology Acquisition and
recognition are reclassified in the For repurchase and reverse repurchase Promotion
statement of financial position from agreements measured at amortised cost,
financial investments or trading assets the difference between the purchase Transactions and/or events of a financial
to pledged assets, if the transferee has and sales price is treated as interest and nature that require approval and/or
received the right to sell or re-pledge amortised over the expected life using the registration or any act to be performed by
them in the event of default from agreed effective interest rate method. a statutory body in Nigeria and/or where
terms. Initial recognition of pledged a statute clearly provides for a particular
assets is at fair value, whilst subsequently Offsetting act to be performed and/or registration to
measured at amortized cost or fair value be obtained; such transactions or events
as approriate. These transactions are Financial assets and liabilities are offset shall be regarded as having financial
performed in accordance with the usual and the net amount reported in the reporting implication only when such act
terms of securities lending and borrowing. statement of financial position when is performed and/or such registration is
there is a legally enforceable right to obtained. Accordingly, the details of the
Sale and repurchase agreements set-off the recognised amounts and required act and/or registration obtained
there is an intention to settle the asset from such statutory body shall be disclosed
Securities sold subject to linked repurchase and the liability on a net basis, or to by way of note in the financial statements
agreements (repurchase agreements) are realise the asset and settle the liability if the transaction is recognised as part of
reclassified in the statement of financial simultaneously. the financial reporting of the entity.
position as pledged assets when the
transferee has the right by contract or The group has entered into various
custom to sell or repledge the collateral. agreements in relation to information
The liability to the counterparty is included technology services which, as at year end
under deposit and current accounts or 31 December 2018 financial period, were
trading liabilities, as appropriate. yet to be registered by the appropriate
statutory body. We have reported these
contracts in line with the rule specified
above (see note 31.9).
182 Stanbic IBTC Annual report for the year ended 31 December 2018
NOTES TO THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS
For the year ended 31 December 2018
4. Statement of significant accounting policies (continued)
4.5 Fair value
Fair value
Inputs and valuation Day one profit/loss Cost exception Fair value hierarchy
techniques Hierarchy transfers
Fair value levels
In terms of IFRS, the group is either In estimating the fair value of an asset or length transactions, discounted cash
required to or elects to measure a number a liability, the group takes into account flow analyses, pricing models and other
of its financial assets and financial the characteristics of the asset or liability valuation techniques commonly used by
liabilities at fair value. Regardless of that market participants would take into market participants.
the measurement basis, the fair value account when pricing the asset or liability
is required to be disclosed, with some at the measurement date. Fair value measurements are categorised
exceptions, for all financial assets and into level 1, 2 or 3 within the fair value
financial liabilities. Inputs and valuation techniques hierarchy based on the degree to which
the inputs to the fair value measurements
Fair value is the price that would be Fair value is measured based on quoted are observable and the significance of
received to sell an asset or paid to transfer market prices or dealer price quotations the inputs to the fair value measurement.
a liability in an orderly transaction in the for identical assets and liabilities that are Where discounted cash flow analyses are
principal (or most advantageous) market traded in active markets, which can be used, estimated future cash flows are
between market participants at the accessed at the measurement date, and based on management’s best estimates
measurement date under current market where those quoted prices represent and a market related discount rate at the
conditions. Fair value is a market based fair value. If the market for an asset or reporting date for an asset or liability with
measurement and uses the assumptions liability is not active or the instrument is similar terms and conditions. If an asset or
that market participants would use when not quoted in an active market, the fair a liability measured at fair value has both
pricing an asset or liability under current value is determined using other applicable a bid and an ask price, the price within the
market conditions. When determining valuation techniques that maximise the bid-ask spread that is most representative
fair value it is presumed that the entity use of relevant observable inputs and of fair value is used to measure fair value.
is a going concern and is not an amount minimises the use of unobservable inputs.
that represents a forced transaction, These include the use of recent arm’s
involuntary liquidation or a distressed sale.
OVERVIEW BUSINESS REVIEW ANNUAL REPORT & FINANCIAL STATEMENTS OTHER INFORMATION 183
The group’s valuation control framework governs internal control standards, methodologies, and procedures over its valuation processes,
which include the following valuation techniques and main inputs and assumptions per type of instrument:
Item Description Valuation technique Main inputs and assumptions (Level
Derivative financial 2 and 3 fair value hierarchy
instruments Derivative financial instruments comprise items)
foreign exchange, and interest rate.
Trading assets and Standard derivative contracts are • Discount rate*
Trading liabilities Trading assets and liabilities comprise valued using market accepted • Spot prices of the underlying
instruments which are part of the group’s models and quoted parameter
underlying trading activities. These inputs. More complex derivative assets
instruments primarily include sovereign contracts are modelled using • Correlation factors
and corporate debt, and collateral. more sophisticated modelling • Volatilities
techniques applicable to the • Dividend yields
instrument. Techniques include: • Earnings yield
• Discounted cash flow model • Valuation multiples
• Black-Scholes model
Where there are no recent market
transactions in the specific
instrument, fair value is derived
from the last available market
price adjusted for changes in risks
and information since that date.
184 Stanbic IBTC Annual report for the year ended 31 December 2018
NOTES TO THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS
For the year ended 31 December 2018
4. Statement of significant accounting policies (continued)
Item Description Valuation technique Main inputs and
assumptions (Level
2 and 3 fair value
hierarchy items)
Pledged assets Pledged assets comprise instruments Where a proxy instrument is quoted in an active market, the • Discount rate*
that may be sold or repledged by fair value is determined by adjusting the proxy fair value for • Spot prices of the
the group’s counterparty in the differences between the proxy instrument and the financial
absence of default by the group. investment being fair valued. Where proxies are not underlying assets
Pledged assets include sovereign available, the fair value is estimated using more complex • Correlation factors
debt (government treasury bills modelling techniques. These techniques include discounted • Volatilities
and bonds) pledged in terms of cash flow and Black-Scholes models using current market • Dividend yields
repurchase agreements. rates for credit, interest, liquidity, volatility and other risks. • Earnings yield
Combination techniques are used to value unlisted equity • Valuation
Financial Financial investments are securities and include inputs such as earnings and dividend
investments non-trading financial assets and yields of the underlying entity. multiples
primarily comprise of sovereign
and corporate debt, unlisted equity
instruments, investments in mutual
fund investments and unit-linked
investments.
Loans and Loans and advances comprise: For certain loans, fair value may be determined from the • Discount rate.
advances to market price of a recently occurring transaction adjusted for • Probability of
banks and • Loans and advances to banks: call changes in risks and information between the transaction
customers loans, loans granted under resale and valuation dates. Loans and advances are reviewed for default.
agreements and balances held with observed and verified changes in credit risk and the credit • Loss given default.
other banks. spread is adjusted at subsequent dates if there has been
an observable change in credit risk relating to a particular
• Loans and advances to customers: loan or advance. In the absence of an observable market
mortgage loans (home loans and for these instruments, discounted cash flow models are
commercial mortgages), other asset- used to determine fair value. Discounted cash flow models
based loans, including collateralised incorporate parameter inputs for interest rate risk, foreign
debt obligations (instalment sale and exchange risk, liquidity and credit risk, as appropriate. For
finance leases), and other secured credit risk, probability of default and loss given default
and unsecured loans (card debtors, parameters are determined using the relevant terms of the
overdrafts, other demand lending, loan and loan counterparty such as the industry classification
term lending and loans granted under and subordination of the loan.
resale agreements).
Deposits from Deposits from banks and customers For certain deposits, fair value may be determined from the • Discount rate.
bank and comprise amounts owed to banks market price on a recently occurring transaction adjusted for • Probability of
customers and customers, deposits under all changes in risks and information between the transaction
repurchase agreements, negotiable and valuation dates. In the absence of an observable market default.
certificates of deposit, credit-linked for these instruments discounted cash flow models are • Loss given
deposits and other deposits. used to determine fair value based on the contractual cash • default.
flows related to the instrument. The fair value measurement
incorporates all market risk factors including a measure of
the group’s credit risk relevant for that financial liability. The
market risk parameters are valued consistently to similar
instruments held as assets stated in the section above. For
collateralised deposits that are designated to be measured at
fair value through profit or loss, such as securities repurchase
agreements, the credit enhancement is incorporated into the
fair valuation of the liability.
* Discount rates, where applicable, include the risk-free rate, risk premiums, liquidity spreads, credit risk (own and counterparty as appropriate),
timing of settlement, storage/service costs, prepayment and surrender risk assumptions and recovery rates/loss given default.
OVERVIEW BUSINESS REVIEW ANNUAL REPORT & FINANCIAL STATEMENTS OTHER INFORMATION 185
Day one profit or loss The timing of the recognition of deferred Cost exception (applicable before
For financial instruments, where the fair day one profit or loss is determined 1 January 2018)
value of the financial instrument differs individually depending on the nature of Where the fair value of investments in
from the transaction price, the difference the instrument and availability of market equity instruments or identical instruments
is commonly referred to as day one profit observable inputs. It is either amortised do not have a quoted price in an active
or loss. Day one profit or loss is recognised over the life of the transaction, deferred market, and derivatives that are linked to
in profit or loss immediately where the until the instrument’s fair value can be and must be settled by delivery of such
fair value of the financial instrument is determined using market observable equity instruments, are unable to be
either evidenced by comparison with other inputs, or realised through settlement. reliably determined, those instruments are
observable current market transactions measured at cost less impairment losses.
in the same instrument, or is determined Any difference between the fair value Impairment losses on these financial assets
using valuation models with only at initial recognition and the amount are not reversed.
observable market data as inputs. that would be determined at that date
using a valuation technique in a situation Fair value hierarchy
Day one profit or loss is deferred where in which the valuation is dependent on The group’s financial instruments that are
the fair value of the financial instrument unobservable parameters is not recognised both carried at fair value and for which
is not able to be evidenced by comparison in profit or loss immediately but is fair value is disclosed are categorised by
with other observable current market recognised over the life of the instrument level of fair value hierarchy. The different
transactions in the same instrument, on an appropriate basis or when the levels are based on the degree to which
or determined using valuation models instrument is redeemed. the inputs to the fair value measurements
that utilise non-observable market data are observable and the significance of the
as inputs. inputs to the fair value measurement.
Hierarchy levels
The levels have been defined as follows:
Level 1 Fair value is based on quoted market prices (unadjusted) in active markets for an identical financial asset or
Level 2 liability. An active market is a market in which transactions for the asset or liability take place with sufficient
frequency and volume to provide pricing information on an ongoing basis.
Level 3
Fair value is determined through valuation techniques based on observable inputs, either directly, such as quoted
prices, or indirectly, such as those derived from quoted prices. This category includes instruments valued using
quoted market prices in active markets for similar instruments, quoted prices for identical or similar instruments in
markets that are considered less than active or other valuation techniques where all significant inputs are directly or
indirectly observable from market data.
Fair value is determined through valuation techniques using significant unobservable inputs. This category includes
all instruments where the valuation technique includes inputs not based on observable data and the unobservable
inputs have a significant effect on the instrument’s valuation. This category includes instruments that are valued
based on quoted prices for similar instruments where significant unobservable adjustments or assumptions are
required to reflect differences between the instrument being valued and the similar instrument.
Hierarchy transfer policy
Transfers of financial assets and financial liabilities between levels of the fair value hierarchy are deemed to have occurred at the end of
the reporting period during which change occurred.
186 Stanbic IBTC Annual report for the year ended 31 December 2018
NOTES TO THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS
For the year ended 31 December 2018
4. Statement of significant accounting policies (continued)
4.6 Employee Benefits
Employee benefits
Post-employment Termination benefits Short-term benefits Equity-linked
benefits transactions
Defined contribution Equity-settled share
plans
based-payments
Cash-settled share
based-payments
Type Description Statement of financial position Statement of Income statement
other
Defined The group operates a contributory Liability is recognised for comprehensive Contributions are recognised
contribution pension plan in line with the Pension unpaid contributions. income as an expense in profit or
plans Reform Act 2014. loss in the periods during
Employees and the Bank contribute No impact. which services are rendered
Termination 8% and 10% respectively of each by
benefits of the qualifying staff salary in line employees.
with the provisions of the Pension
Short-term Reforms Act 2014.
benefits
Termination benefits are recognised A liability is recognised for the No impact. Termination benefits
when the group is committed, without termination benefit are recognised as an expense
realistic possibility of withdrawal, to representing the best if the group has made an offer
a formal detailed plan to terminate estimate of the amount encouraging voluntary
employment before the normal payable. redundancy, it is probable that
retirement date, or to provide the offer will be accepted, and
termination benefits as a result of an the number of acceptances
offer made to encourage voluntary can be estimated reliably.
redundancy when it is probable
that the offer will be accepted, and
the number of acceptances can be
estimated reliably.
Short-term benefits consist of A liability is recognised for the No direct Short-term employee benefit
salaries, accumulated leave payments, amount expected to be paid impact. obligations are measured on
profit share, bonuses and any non- under short-term cash bonus an undiscounted basis and
monetary benefits such as medical plans or accumulated leave if are expensed as the related
aid contributions. the group has a present legal service is provided.
or constructive obligation to
pay this amount as a result of
past service provided by the
employee and the obligation
can be estimated reliably.
OVERVIEW BUSINESS REVIEW ANNUAL REPORT & FINANCIAL STATEMENTS OTHER INFORMATION 187
Equity-linked transactions
Equity-settled share The fair value of the equity-settled share based payments are determined on grant date and accounted for within
based payments operating expenses - staff costs over the vesting period with a corresponding increase in the group’s share based
payment reserve. Non-market vesting conditions, such as the resignation of employees and retrenchment
Cash-settled share of staff, are not considered in the valuation but are included in the estimate of the number of options expected
based payments to vest. At each reporting date, the estimate of the number of options expected to vest is reassessed and
adjusted against profit or loss and equity over the remaining vesting period.
On vesting of the equity-settled share based payments, amounts previously credited to the share based payment
reserve are transferred to retained earnings through an equity transfer.
Cash-settled share based payments are accounted for as liabilities at fair value until the date of settlement. The
liability is recognised over the vesting period and is revalued at every reporting date up to and including the date
of settlement. All changes in the fair value of the liability are recognised in operating expenses – staff costs.
4.7 Non-financial assets (intangible assets, property and equipment)
Non financial assets
Tangible assets Intangible assets
Leasehold improvements Computer software
and building
Computer equipment
Land
Motor vehicles
Furniture, fittings
and equipment
188 Stanbic IBTC Annual report for the year ended 31 December 2018
NOTES TO THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS
For the year ended 31 December 2018
4. Statement of significant accounting policies (continued)
Type Initial and subsequent Useful lives, depreciation/ Impairment Derecognition
measurement amortisation method or fair
Tangible value basis
assets
Property and equipment Property and equipment are Intangible assets that The non- financial assets
are measured at cost less depreciated on the straight-line have an indefinite useful are derecognised on
accumulated depreciation and basis over estimated useful lives life are tested annually disposal or when no future
accumulated impairment losses. (see below) of the assets to their for impairment and economic benefits are
Cost includes expenditure residual values. Land and Work-in additionally when an expected from their use
that is directly attributable to progress are not depreciated. indicator of impairment or disposal. The gain or
the acquisition of the asset. exists. loss on derecognition is
Land is measured at cost less Land N/A recognised in profit or loss
accumulative impairment loss. Other non-financial and is determined as the
Land is not depreciated. Buildings 25 years assets are reviewed difference between the
for impairment at each net disposal proceeds and
Costs that are subsequently Computer 3-5 years reporting date and tested the carrying amount of
incurred are included in the for impairment whenever the non-financial asset.
asset’s related carrying amount Motor vehicles 4 years events or changes in
or are recognised as a separate circumstances indicate that
asset, as appropriate, only Office 6 years the carrying amount may
when it is probable that future equipments not be recoverable.
economic benefits will flow
to the group and the cost of Furniture 4 years An impairment loss is
the item can be measured recognised in profit or loss
reliably. Expenditure, which Capitalised greater of for the amount by which
does not meet these criteria, is leased assets/ 6 years or the asset’s carrying amount
recognised in profit or loss as branch useful life of exceeds its recoverable
incurred. refurbishments underlying asset amount. The recoverable
amount is determined as
Where significant parts of an The residual values, useful lives the higher of an asset’s fair
item of property or equipment and the depreciation method value less costs to sell and
have different useful lives, they applied are reviewed, and adjusted value in use.
are accounted for as separate if appropriate, at each financial
major components of property period end.
and equipment.
Fair value less costs to
sell is determined by
ascertaining the current
market value of an asset
and deducting any costs
related to the realisation
of the asset.
In assessing value in use,
the estimated future cash
flows are discounted to
their present value using a
pre-tax discount rate that
reflects current market
assessments of the time
value of money and the
risks specific to the asset.
OVERVIEW BUSINESS REVIEW ANNUAL REPORT & FINANCIAL STATEMENTS OTHER INFORMATION 189
Type Initial and subsequent measurement Useful lives, depreciation/ Impairment Derecognition
amortisation method or fair
Intangible value basis
assets/
computer Costs associated with developing or Amortisation is recognised in
software maintaining computer software programmes profit or loss on a straight-line
and the acquisition of software licences basis at rates appropriate to the
are generally recognised as an expense expected lives of the assets (2 to
as incurred. However, direct computer 15 periods) from the date that the
software development costs that are clearly asset is available for use.
associated with an identifiable and unique
system, which will be controlled by the Amortisation methods, useful lives
group and have a probable future economic and residual values are reviewed
benefit beyond one period, are recognised at each financial period end and
as intangible assets. adjusted, if necessary.
Intangible assets are carried at cost less
accumulated amortisation and accumulated
impairment losses from the date that the
assets are available for use.
Expenditure subsequently incurred on
computer software is capitalised only when
it increases the future economic benefits
embodied in the specific asset to which it
relates.
190 Stanbic IBTC Annual report for the year ended 31 December 2018
NOTES TO THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS
For the year ended 31 December 2018
4. Statement of significant accounting policies (continued)
4.8 Leases
Leases
Financial leases Operating leases
Lessee
Lessee
Lessor
Type Description Statement of financial position Income statement
Finance lease
-lessee Leases, where the group The leased asset is capitalised at the inception of A lease finance cost,
assumes substantially all the the lease at the lower of the fair value of the leased determined with reference to
Finance lease risks and rewards incidental asset and the present value of the minimum lease the interest rate implicit in the
-lessor to ownership, are classified payments together with an associated liability to lease or the group’s incremental
as finance leases. the lessor. borrowing rate, is recognised
Operating lease within interest expense over the
-lessee Lease payments less the interest component, which lease period.
is calculated using the interest rate implicit in the
lease or the group’s incremental borrowing rate,
are recognised as a capital repayment which
reduces the liability to the lessor.
Leases, where the group Finance lease receivable, including initial direct Finance charges earned within
transfers substantially all the costs and fees, are primarily accounted for as interest income are computed
risks and rewards incidental financing transactions in banking activities, with using the effective interest
to ownership, are classified as rentals and instalments receivable, less unearned method, which reflects a
finance leases. finance charges, being included in loans and constant periodic rate of return
receivables. on the investment in the finance
lease.
All leases that do not meet Accruals for unpaid lease charges, together with Payments made under operating
the criteria of a finance lease a straight-line lease asset or liability, being the leases, net of any incentives
are classified as operating difference between actual payments and the received from the lessor, are
leases. straight-line lease expense are recognised. recognised in profit or loss on
a straight-line basis over the
term of the lease. Contingent
rentals are expensed as they are
incurred.
When an operating lease is
terminated before the lease
period has expired, any payment
required to be made to the
lessor by way of penalty is
recognised as an expense in
the period in which termination
takes place.
OVERVIEW BUSINESS REVIEW ANNUAL REPORT & FINANCIAL STATEMENTS OTHER INFORMATION 191
4.9 Equity
Equity
Share issue costs Distributions on ordinary shares
Share issue costs Incremental external costs directly attributable to a transaction that increases or decreases equity are deducted
from equity, net of related tax. All other share issue costs are expensed.
Distributions to
owners Distributions are recognised in equity in the period in which they are declared. Distributions declared after
the reporting date are disclosed in the distributions note to the financial statements.
4.10 Provisions, contingent assets and contingent liabilities
Provisions, contingent assets
and contingent liabilities
Provisions Contingent assets Contingent liabilities
Provision for legal claims
Provision for restructuring
Provision for onerous contracts
Provision for tax claims
192 Stanbic IBTC Annual report for the year ended 31 December 2018
NOTES TO THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS
For the year ended 31 December 2018
4. Statement of significant accounting policies (continued)
Provisions Provisions are recognised when the group has a present legal or constructive obligation as a result of past events,
it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation
and a reliable estimate of the amount of the obligation can be made. Provisions are determined by discounting the
expected future cash flows using a pre-tax discount rate that reflects current market assessments of the time value
of money and the risks specific to the liability. The group’s provisions typically (when applicable) include the following:
Provisions for legal claims
Provisions for legal claims are recognised on a prudent basis for the estimated cost for all legal claims that have not
been settled or reached conclusion at the reporting date. In determining the provision management considers the
probability and likely settlement (if any). Reimbursements of expenditure to settle the provision are recognised when
and only when it is virtually certain that the reimbursement will be received.
Provision for restructuring
A provision for restructuring is recognised when the group has approved a detailed formal plan, and the restructuring
either has commenced or has been announced publicly. Future operating costs or losses are not provided for.
Provision for onerous contracts
A provision for onerous contracts is recognised when the expected benefits to be derived by the group from a contract
are lower than the unavoidable cost of meeting its obligations under the contract. The provision is measured at the
present value of the lower of the expected cost of terminating the contract and the expected net cost of continuing
with the contract. Before a provision is established, the group recognises any impairment loss on the assets associated
with that contract.
Provision for tax claims
Provisions for taxes claims relates to additional assessment on taxes, including withholding tax, value added tax,
PAYE tax.
Contingent assets Contingent assets are not recognised in the annual financial statements but are disclosed when, as a result of past
events, it is probable that economic benefits will flow to the group, but this will only be confirmed by the occurrence
or non-occurrence of one or more uncertain future events which are not wholly within the group’s control.
Contingent liabilities Contingent liabilities include certain guarantees (other than financial guarantees) and letters of credit and are not
recognised in the annual financial statements but are disclosed in the notes to the annual financial statements.
4.11 Taxation
Taxation
Income tax Indirect tax
Current tax
Deferred tax
OVERVIEW BUSINESS REVIEW ANNUAL REPORT & FINANCIAL STATEMENTS OTHER INFORMATION 193
Type Description, recognition and measurement Offsetting
Current tax- Current tax represents the expected tax payable on taxable income for the period, using tax rates
determined for enacted or substantively enacted at the reporting date, and any adjustments to tax payable in
current period respect of previous periods. Current tax also includes any tax arising from dividend.
transactions
and events Current tax is recognised as an expense for the period and adjustments to past periods except to
the extent that current tax related to items that are charged or credited in OCI or directly to equity.
Nigerian tax laws mandates a minimum tax assessment for companies having no taxable profits
for the period or where the tax on profits is below the minimum tax. Minimum tax is computed as
0.125% of turnover in excess of N500,000 plus the highest of: (i) 0.5% of gross profits; (ii) 0.5%
of net assets; (iii) 0.25% of paid-up capital; or (iv) 0.25% of turnover.
Further, the Nigerian tax laws mandates that where a dividend is paid out of profit on which no tax
is payable due to either: (a) no total profit; or (b) the total profit is less than the amount of dividend
paid, the company paying the dividend will be subjected to tax at 30% of the dividends paid, as if
the dividend is the total profits of the company for the period of assessment to which the accounts,
out of which the dividends paid relates.
When applicable, minimum tax is recorded under current income tax in profit or loss.
Deferred tax- Deferred tax is recognised in profit or loss except to the extent that it relates to a business Current tax assets and
determined combination (relating to a measurement period adjustment where the carrying amount of the liabilities, deferred tax
for future tax goodwill is greater than zero), or items recognised directly as part of OCI. assets and liabilities
consequences are offset if there is
Deferred tax is recognised in respect of temporary differences arising between the tax bases a legally enforceable
of assets and liabilities and their carrying values for financial reporting purposes. Deferred tax right to offset current
is measured at the tax rates that are expected to be applied to the temporary differences when tax liabilities and
they reverse, based on the laws that have been enacted or substantively enacted at the reporting assets, and they
date. Deferred tax is not recognised for the following temporary differences: relate to income taxes
levied by the same
• the initial recognition of goodwill; tax authority on the
• the initial recognition of assets and liabilities in a transaction that is not a business combination, same taxable entity,
or on different tax
which affects neither accounting nor taxable profits or losses; and entities, but they
• investments in subsidiaries, associates and jointly controlled arrangements (excluding mutual intend to settle
current tax liabilities
funds) where the group controls the timing of the reversal of temporary differences and it is and assets on a net
probable that these differences will not reverse in the foreseeable future. basis or their tax
assets and liabilities
The amount of deferred tax provided is based on the expected manner of realisation or settlement will be realised
of the carrying amount of the asset or liability and is not discounted. simultaneously.
Deferred tax assets are recognised to the extent that it is probable that future taxable income will
be available against which the unused tax losses can be utilised. Deferred tax assets are reviewed at
each reporting date and are reduced to the extent that it is no longer probable that the related tax
benefit will be realised.
Indirect Indirect taxes are recognised in profit or loss, as part of other operating expenses. N/A
taxation
Taxes on dividends declared by the group are recognised as part of the dividends paid within equity N/A
Dividend tax as dividend tax represents a tax on the shareholder and not the group.
194 Stanbic IBTC Annual report for the year ended 31 December 2018
NOTES TO THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS
For the year ended 31 December 2018
4. Statement of significant accounting policies (continued)
4.12 Revenue and expenditure
Revenue and expenditure
Net interest income Non-interest revenue Operating expenses
Net fee and commission revenue Other revenue
Trading revenue Management fees on asset under management
Description Recognition and measurement
Net interest income
Interest income and expense (with the exception of borrowing costs that are capitalised on qualifying
assets, that is assets that necessarily take a substantial period of time to get ready for their intended use or
sale and which are not measured at fair value) are recognised in profit or loss using the effective interest
method for all interest-bearing financial instruments.
In terms of the effective interest method, interest is recognised at a rate that exactly discounts estimated future cash
payments or receipts through the expected life of the financial instrument or, where appropriate, a shorter period, to
the net carrying amount of the financial asset or financial liability. Direct incremental transaction costs incurred and
origination fees received, including loan commitment fees, as a result of bringing margin- yielding assets or liabilities
into the statement of financial position, are capitalised to the carrying amount of financial instruments that are not at
fair value through profit or loss and amortised as interest income or expense over the life of the asset or liability as part
of the effective interest rate.
Where the estimates of payments or receipts on financial assets or financial liabilities are subsequently revised, the
carrying amount of the financial asset or financial liability is adjusted to reflect actual and revised estimated cash flows.
The carrying amount is calculated by computing the present value of the adjusted cash flows at the financial asset or
financial liability’s original effective interest rate. Any adjustment to the carrying value is recognised in net interest
income.
When a financial asset is classified as specifically impaired (before 1 January 2018) or as Stage 3 impaired (after 1
January 2018), interest income is calculated on the impaired value (gross carrying value less specific impairment) based
on the original effective interest rate. The contractual interest income on the gross exposure is suspended and is only
recognised in interest income when the financial asset is no longer specifically impaired (before 1 January 2018) or is
reclassified out of Stage 3 (after 1 January 2018).
Dividends received on preference share investments classified as debt form part of the group’s lending activities and
are included in interest income.
Before 1 January 2018
The following additional amounts are recognised in net interest income:
• Fair value gains and losses on debt financial assets that are designated at fair value through profit or loss
• The gain or loss on the derecognition of a financial asset classified as available-for-sale
• Gains and losses arising from the derecognition of financial assets and financial liabilities classified
as at amortised cost
• Fair value gains and losses financial liabilities (including changes as a result of own credit risk) that are
designated at fair value through profit or loss.
OVERVIEW BUSINESS REVIEW ANNUAL REPORT & FINANCIAL STATEMENTS OTHER INFORMATION 195
Net fee and Fee and commission revenue, including transactional fees, account servicing fees, investment management fees, sales
commission revenue commissions and placement fees are recognised as the related services are performed. Loan commitment fees for loans
that are not expected to be drawn down are recognised on a straight-line basis over the commitment period.
Loan syndication fees, where the group does not participate in the syndication or participates at the same effective
interest rate for comparable risk as other participants, are recognised as revenue when the syndication has been
completed. Syndication fees that do not meet these criteria are capitalised as origination fees and amortised as interest
income. The fair value of issued financial guarantee contracts on initial recognition is amortised as income over the
term of the contract.
Fee and commission expenses, included in net fee and commission revenue, are mainly transaction and service fees
relating to financial instruments, which are expensed as the services are received. Expenditure is recognised as fee and
commission expenses where the expenditure is linked to the production of fee and commission revenue.
Trading revenue Trading revenue comprises all gains and losses from changes in the fair value of trading assets and liabilities, together
with related interest income, expense and dividends.
Other revenue Other revenue includes dividends on equity financial assets, underwriting profit from the group’s short-term insurance
operations and related insurance activities and re- measurement gains and losses from contingent consideration on
disposals and purchases.
After 1 January 2018
Gains and losses on equity instruments designated at fair value through profit or loss are recognised within other
revenue. Gains and losses on equity instruments classified as available-for-sale financial assets are reclassified from
OCI to other revenue on derecognition or impairment.
Dividend income Dividends are recognised in profit or loss when the right to receipt is established. Scrip dividends are recognised as
dividends received where the dividend declaration allows for a cash alternative.
Management fees Fee income includes management fees on assets under management and administration fees. Management fees on
on assets under assets under management are recognised over the period for which the services are rendered, in accordance with the
management substance of the relevant agreements.
Operating expenses Expenses are recognised on an accrual bases regardless of the time of cash outflows. Expenses are recognized
in the income statement when a decrease in future economic benefit related to a decrease in an asset or an
increase of a liability has arisen that can be measured reliably.
Expenses are recognized in the same reporting period when they are incurred in cases when it is not probable
to directly relate them to particular income earned during the current reporting period and when they are not
expected to generate any income during the coming periods. Expenses that are not related to the income earned
during the reporting period, but expected to generate future economic benefits, are recorded in the financial
statements as assets.
196 Stanbic IBTC Annual report for the year ended 31 December 2018
NOTES TO THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS
For the year ended 31 December 2018
4. Statement of significant accounting policies (continued)
Offsetting
Income and expenses are presented on a net basis only when permitted by the accounting standards, or for gains and losses arising
from a group of similar transactions.
In addition to the above identified changes between IAS 39 and IFRS 9, interest in suspense (IIS)refers to contractual interest which
accrues on financial assets which are classified as non-performing) is presented as follows:
IAS 39 accounting treatment (Before 1 January 2018)
Up to 31 December 2017, IAS 18 Revenue (IAS 18) required interest income to be recognised only when it was probable that the economic
benefits associated with a transaction would flow to the entity. The group, in line with these requirements suspended the recognition of
contractual interest from the point that a financial asset was classified as specifically impaired. The accounting presentation policy for this
suspended contractual interest was to present the balance sheet interest in suspense (IIS) account as part of the gross carrying amount of the
financial asset (i.e. gross carrying amount net of IIS). In addition, upon the curing of the non-performing financial asset, the group elected an
accounting presentation policy to recognised this suspended contractual interest (previously unrecognised interest) within interest revenue
line within the income statement. This policy was elected on the basis that the presentation best represented the nature of the amount in
terms of IAS 1.
IFRS 9 accounting treatment (After 1 January 2018)
Requires that interest for financial assets classified as stage 3 (i.e. in default) only be calculated on the gross carrying amount less impairments
(i.e. amortised cost balance). The group has applied this requirement by suspending all contractual interest on such financial assets and
recognising interest on the amortised cost balance utilising the financial assets’ effective interest rate. IFRS 9 requires that the suspended
contractual interest be recognised as part of the financial assets’ gross carrying amount and be deducted as part of the reconciliation to the
net carrying amount which is reported in the balance sheet. Whilst the IIS is recognised in the gross carrying amount it does not impact the
net carrying amount of the financial asset as presented on the face of the statement of financial position. Given the IFRS 9 requirement that
the gross carrying amount would include the contractual suspended interest on financial assets classified as stage 3. However, the group
will, report the balance sheet interest in suspense account as a separate reconciling item when calculating the financial assets’ net carrying
amount. This change in presentation will result in an increase gross carrying amount when compared to the IAS 39 gross carrying amount.
The group has elected to continue to present upon the curing of the non-performing financial asset, this suspended contractual interest
(previously unrecognised interest) within interest revenue line within the income. This policy was elected on the basis that the presentation
best represented the nature of the amount in terms of IAS 1.
4.13 Other significant Other significant accounting policies
accounting policies
Segment reporting Fiduciary activities Non interest banking Statutory credit Other regulatory
risk reserve reserve
Statutory reserves Small & medium scale
industries reserve
OVERVIEW BUSINESS REVIEW ANNUAL REPORT & FINANCIAL STATEMENTS OTHER INFORMATION 197
Segment reporting An operating segment is a component of the group engaged in business activities, whose operating results are
reviewed regularly by management in order to make decisions about resources to be allocated to segments and
Fiduciary activities assessing segment performance. The group’s identification of segments and the measurement of segment results
is based on the group’s internal reporting to management.
Statutory credit risk
reserve Transactions between segments are priced at market-related rates.
Statutory reserve
The group commonly engages in trust or other fiduciary activities that result in the holding or placing of assets on
behalf of individuals, trusts, post-employment benefit plans and other institutions. These assets and the income
arising directly thereon are excluded from these annual financial statements as they are not assets of the group.
However, fee income earned and fee expenses incurred by the group relating to the group’s responsibilities from
fiduciary activities are recognised in profit or loss.
The statutory credit risk reserve represents a reserve component created w hen credit impairment on loans and
advances as accounted for under IFRS using the expected loss model differ from the Prudential Guidelines set
by the Central Bank of Nigeria.
Nigerian banking and pension industry regulations require the banking and pension subsidiaries to make an annual
appropriation to a statutory reserve.
For the banking subsidiary, an appropriation of 30% of profit after tax is made if the statutory reserve is less than
paid-up share capital and 15% of profit after tax if the statutory reserve is greater than the paid up share capital.
The pension subsidiary is required to transfer 12.5% of its profit after tax to a statutory reserve. Statutory reserve is
not available for distribution to shareholders.
See note 19.4 (b)(i).
4.14 Non-current assets held for sale and disposal groups
Type Description Statement of financial position Income statement
Non-current assets/ Comprising assets and liabilities Immediately before classification, the assets Impairment losses on initial
disposal groups that that are expected to be recovered (or components of a disposal group) are classification as well as
are held for sale primarily through sale rather than remeasured in accordance with the group’s subsequent gains and losses
continuing use (including regular accounting policies and tested for impairment. on remeasurement of these
purchases and sales in the ordinary Thereafter, the assets are measured at the assets or disposal groups are
course of business). lower of their carrying amount and fair value recognised in profit or loss.
less costs to sell.
Property and equipment
Assets and liabilities (or components of and intangible assets are not
a disposal group) are presented separately depreciated or amortised.
in the statement of financial position.
198 Stanbic IBTC Annual report for the year ended 31 December 2018
NOTES TO THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS
For the year ended 31 December 2018
4. Statement of significant accounting policies (continued)
4.15 Equity linked transactions
The group’s equity compensation plans
Equity-settled share based-payments Cash-settled share based-payments
Equity-settled share based payments The fair value of the equity-settled share based payments are determined on grant date
Cash-settled share based payments and accounted for within operating expenses - staff costs over the vesting period with a
corresponding increase in the group’s share-based payment reserve. Non-market vesting
conditions, such as the resignation of employees and retrenchment of staff, are not considered
in the valuation but are included in the estimate of the number of options expected to vest. At
each reporting date, the estimate of the number of options expected to vest is reassessed and
adjusted against profit or loss and equity over the remaining vesting period.
On vesting of the equity-settled share based payments, amounts previously credited to the
sharebased payment reserve are transferred to retained earnings through an equity transfer.
Cash-settled share based payments are accounted for as liabilities at fair value until the date
of settlement. The liability is recognised over the vesting period and is revalued at every
reporting date up to and including the date of settlement. All changes in the fair value of the
liability are recognised in operating expenses – staff costs.
OVERVIEW BUSINESS REVIEW ANNUAL REPORT & FINANCIAL STATEMENTS OTHER INFORMATION 199
4.16 New standards and interpretations not yet effective
Pronouncement IFRS 10 and IAS 28 (amendments) Sale or Contribution of Assets between an Investor and its Associate or Joint Venture
Title
Effective date The amendments address an inconsistency between the requirements in IFRS 10 and those in IAS 28, in dealing with
Title the sale or contribution of assets between an investor and its associate or joint venture. The main consequence of the
amendments is that a full gain or loss is recognised when a transaction involves a business (whether it is housed in a
Effective date subsidiary or not). A partial gain or loss is recognised when a transaction involves assets that do not constitute a business,
Title even if these assets are housed in a subsidiary.
Effective date
The amendments will be applied prospectively and are not expected to have a material impact on the group’s financial
statements.
1 January 2019
IFRS 17 Insurance Contracts
This standard replaces the existing accounting standard IFRS 4 Insurance Contracts which gave entities dispensation
to account for insurance contracts (particularly measurement) using local actuarial practice, resulting in a multitude
of different approaches.
The overall objective of IFRS 17 is to provide a more useful and consistent accounting model for insurance contracts
among entities issuing insurance contracts globally. The standard requires an entity to measure insurance contracts
using updated estimates and assumptions that reflect the timing of cash flows and any uncertainty relating to insurance
contracts. A general measurement model (“GMM”) will be applied to long-term insurance contracts, and is based on a
fulfilment objective (risk-adjusted present value of best estimate future cash flows) and uses current estimates, informed
by actual trends and investment markets. IFRS 17 establishes what is called a contractual service margin (“CSM”) in the
initial measurement of the liability which represents the unearned profit on the contract and results in no gain on initial
recognition. The CSM is released over the life of the contract, but interest on the CSM is locked in at inception rates. The
CSM will be utilised as a “shock absorber” in the event of changes to best estimate cash flows. On loss making (onerous)
contracts, no CSM is set up and the full loss is recognised at the point of contract inception. The GMM is modified for
contracts which have participation features.
An optional simplified premium allocation approach (“PAA”) is available for all contracts that are less than 12 months at
inception. The PAA is similar to the current unearned premium reserve profile over time. The requirement to eliminate all
treasury shares has been amended such that treasury shares held as underlying items for a group of direct participating
contracts or investment funds are not required to be eliminated and can be accounted for as financial assets.
These requirement will provide transparent reporting about an entities’ financial position and risk and will provide metrics
that can be used to evaluate the performance of insurers and how that performance changes over time. An entity may
re-assess its classification and designation of financial instruments under IFRS 9, on adoption of IFRS 17.
The standard will be applied retrospectively. The impact on the annual financial statements has not yet been
fully determined.
1 January 2021 earlier application permitted
IFRIC 23 Uncertainty over Income Tax Treatments
This Interpretation clarifies how to apply the recognition and measurement requirements in IAS 12 when there is
uncertainty over income tax treatments. In such a circumstance, an entity shall recognise and measure its current or
deferred tax asset or liability applying the requirements in IAS 12 based on taxable profit (tax loss), tax bases, unused tax
losses, unused tax credits and tax rates determined applying this Interpretation. This Interpretation addresses: whether
an entity considers uncertain tax treatments separately; the assumptions an entity makes about the examination of tax
treatments by taxation authorities; how an entity determines taxable profit (tax loss), tax bases, unused tax losses, unused
tax credits and tax rates; and how an entity considers changes in facts and circumstances. The IFRIC will be applied
retrospectively. The impact on the annual financial statements has not yet been fully determined.
1 January 2019 earlier application permitted
200 Stanbic IBTC Annual report for the year ended 31 December 2018
NOTES TO THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS
For the year ended 31 December 2018
4.16 New standards and interpretations not yet effective (continued)
Pronouncement IAS 28 Interest in Associates and Joint Ventures (amendment)
Title
Effective date This amendment clarifies that an entity should apply IFRS 9 including its impairment requirements, to long-term
Title interests in an associate or joint venture that form part of the net investment in the associate or joint venture only when
Effective date the equity method is not applied. The amendments will be applied retrospectively. The amendment is not expected to
Title have a significant impact on the annual financial statements.
Effective date 1 January 2019, earlier application permitted
Title
Annual improvements 2015-2017 cycle
Effective date
The IASB has issued various amendments and clarifications to existing IFRS, none of which is expected to have a
significant impact on the group’s annual financial statements.
1 January 2019, earlier application permitted
IFRS 16 Leases
This standard will replace the existing standard IAS 17 Leases as well as the related interpretations and sets out the
principles for the recognition, measurement, presentation and disclosure of leases for both parties to a contract, being
the lessee (customer) and the lessor (supplier).
The core principle of this standard is that the lessee and lessor should recognise all rights and obligations arising from
leasing arrangements on balance sheet.
The most significant change pertaining to the accounting treatment of operating leases is from the lessees’
perspective. IFRS 16 eliminates the classification of leases as either operating leases or finance leases as is required by
IAS 17 and introduces a single lessee accounting model, where a right of use (ROU) asset together with a liability for
the future payments is to be recognised for all leases with a term of more than 12 months, unless the underlying asset
is of low value.
The lessor accounting requirements in IAS 17 has not changed substantially in terms of this standard as a result a lessor
continues to classify its leases as operating leases or finance leases and accounts for these as it currently done in terms
of IAS 17. In addition, the standard requires lessor to provide enhanced disclosures about its leasing activities and in
particular about its exposure to residual value risk and how it is managed.
The standard will be applied retrospectively. The group formed an IFRS 16 working group and detailed project plan,
identifying key responsibilities and milestones of the project. The estimated impact on the annual financial statements
has been assessed and the transition balance will be passed in January 2019.
1 January 2019, earlier application permitted
IFRS 4 (amendment) Insurance Contracts
The amendment to applying IFRS 9 Financial Instruments with IFRS 4 Insurance Contracts introduce two approaches:
an overlay approach and a deferral approach. The amended Standard will give all companies that issue insurance
contracts the option to recognise in other comprehensive income, rather than profit or loss, the volatility that could
arise when IFRS 9 is applied before the new insurance contracts standard is issued; and give companies whose activities
are predominantly connected with insurance an optional temporary exemption from applying IFRS 9 until 2021. The
entities that defer the application of IFRS 9 will continue to apply the existing financial instruments Standard IAS
39. The amendments to IFRS 4 supplement existing options in the Standard that can already be used to address the
temporary volatility.
The amendments will have no material impact on the activities of the group as the group has no insurance contract as at
reporting date and has no intention to issue insurance contract in the coming year.
1 January 2019, earlier application permitted
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2018 Annual Report - Stanbic IBTC Holdings PLC
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